In a particular labour market,the demand for labour is given by W = 20 - (1 / 100)L,and the supply of labour is given by W = 4 + (1 / 100)L,where W is the wage rate,and L is the number of workers.Suppose that the government decides to impose a minimum wage of $15.The wage will:
A) have no effect since it is below the equilibrium wage.
B) cause a shortage of workers since it is above the equilibrium wage.
C) cause a surplus of workers since it is above the equilibrium wage.
D) result in increases in wages for workers who were employed at the equilibrium wage only.

Question

Quizplus · Accepted Answer

The equilibrium wage is found where demand equals supply: 20 - (1/100)L = 4 + (1/100)L. Solving this gives L = 800, W = 12. Since the minimum wage of $15 is above the equilibrium wage of $12, it will cause a surplus of workers.

In a Particular Labour Market,the Demand for Labour Is Given