The disemployment effect of a minimum wage is greater the:
A)more elastic the supply curve of unskilled workers,for a given demand curve.
B)more inelastic the supply curve of unskilled workers,for a given demand curve.
C)the more inelastic the demand curve for unskilled workers,for a given supply curve.
D)the more elastic the demand curve for unskilled workers,for a given supply curve.

Question

Quizplus · Accepted Answer

When the demand for unskilled workers is elastic, meaning there are many substitutes for labor (such as automation or outsourcing), employers will be more likely to reduce the number of workers they employ in response to an increase in the minimum wage. This is known as the disemployment effect, as some workers may lose their jobs as a result of the minimum wage increase. On the other hand, if demand is inelastic, meaning there are few substitutes for labor, employers may be more willing to absorb the higher labor costs and keep all of their workers. Therefore, the disemployment effect of a minimum wage is greater when the demand for unskilled workers is more elastic.

The Disemployment Effect of a Minimum Wage Is Greater The