The equilibrium wage in a local labour market is $12 per hour.If a minimum wage of $15 per hour is imposed, which of the following will occur?

Question

Quizplus · Accepted Answer

When a minimum wage of $15 per hour is imposed in a local labour market, the equilibrium wage of $12 per hour is disrupted. Firms will now have to pay their workers a higher wage, which leads to an increase in labour costs. As a result, firms will likely reduce the quantity of labour demanded, either by reducing the number of workers they hire or by substituting labour with other inputs, such as automation. This decrease in the quantity of labour demanded will lead to an increase in unemployment, making option A the correct choice. Option B is incorrect, as there will actually be a decrease in the quantity of labour demanded. Option C is also incorrect, as households will likely increase the quantity of labour supplied at the higher wage rate. Option D is not directly related to the imposition of a minimum wage and is therefore incorrect.

The Equilibrium Wage in a Local Labour Market Is $12