Workers at a fast food restaurant currently make minimum wage. If the provincial government increases the minimum wage by $1.00 an hour, what will likely happen?

Question

Quizplus · Accepted Answer

An increase in the minimum wage will increase the cost of labour for the fast food restaurant. This will lead to a shift in the supply curve for fast food as firms will likely reduce the amount of labour they hire, or pass on the increased cost to consumers in the form of higher prices. As a result, the supply of bicycles will face less competition from the fast food restaurant industry for labour, and the supply curve for bicycles will shift to the left. Additionally, there is no correlation between the minimum wage increase and bicycle assembly workers or the supply of bicycles shifting to the right. The firm does not necessarily need to increase output to maintain profit levels with a minimum wage increase.

Workers at a Fast Food Restaurant Currently Make Minimum Wage