Why do some workers lose their job when a minimum wage level is increased?
A)The increase in labor costs decreases the supply of the product, thereby raising the price of the good so that the equilibrium quantity decreases to zero.
B)The increase in the wage rate decreases the quantity of labor demanded.
C)The demand for labor is perfectly inelastic.
D)The supply of labor decreases.
E)The demand for labor is perfectly elastic.

Question

Quizplus · Accepted Answer

When the minimum wage level is increased, it increases the cost of hiring workers for employers. As a result, some employers will reduce their demand for labor by either reducing the number of workers they employ or by reducing the number of hours worked by each employee. This can result in some workers losing their jobs. This decrease in demand for labor is reflected in a leftward shift of the demand curve for labor, resulting in a lower equilibrium wage rate and level of employment.

Why Do Some Workers Lose Their Job When a Minimum