refer to the diagram below, which shows a competitive low-wage labor market:

-Consider the diagram.Suppose the government establishes a minimum wage of $7.00 in this market.Employment would decline by _____ workers and unemployment would increase by _____ workers.

Question

refer to the diagram below, which shows a competitive low-wage labor market:

-Consider the diagram.Suppose the government establishes a minimum wage of $7.00 in this market.Employment would decline by _____ workers and unemployment would increase by _____ workers.

Quizplus · Accepted Answer

When a minimum wage is set above the equilibrium wage, it causes a surplus of labor. The difference between the quantity of labor supplied (at the higher wage) and the quantity of labor demanded represents the increase in unemployment. In this scenario, employment declines by the difference between the original employment level and the new, lower level of employment demanded at the minimum wage. The increase in unemployment is the difference between the higher quantity of labor supplied at the minimum wage and the original equilibrium quantity of labor.

Refer to the Diagram Below, Which Shows a Competitive Low-Wage