Question

Under what circumstances would a minimum wage be a nonbinding price floor? Under what circumstances would a living wage be a binding price floor?

Short answer

Wage floor is non binding, when set below equilibrium wage rate. Living wage is binding, when set above equilibrium wage rate.

Step-by-step solution

Basic Concept 

Price Floor is the minimum mandated price sale price of a good or service, imposed by regulatory body to protect the interests of sellers.

In case of labor markets : price of productive services paid by firms (buyers) & received by workers (sellers) - are wages or salaries.

So, minimum wage is a form of price floor.

Detail Explanation 

Price (Wage) Floor is non binding if it is set below the equilibrium price, as it has no protective effect on sellers, since the equilibrium price would anyways have been above the fixed price.

Price Floor (Living Wage) is binding if it is set above the equilibrium price, as it has protective effect on sellers, since the fixed price is more than free market equilibrium price.