A minimum wage set above the equilibrium wage will ________ the quantity of labor demanded and ________ the quantity of labor supplied.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) not change; not change

Question

Quizplus · Accepted Answer

When the minimum wage is set above the equilibrium wage, it creates a surplus of labor as the quantity of labor supplied exceeds the quantity of labor demanded. Employers will demand less labor because the cost of hiring workers has increased and some workers may become unemployed as a result. At the same time, more workers may be attracted to the labor market due to the higher wage, increasing the supply of labor. This situation leads to a decrease in the quantity of labor demanded and an increase in the quantity of labor supplied.

A Minimum Wage Set Above the Equilibrium Wage Will ________