Stacy's, a chain of discount stores in Washington, employs thousands of people and pays most of them at the minimum wage rate. Following a federally mandated increase of the minimum wage rate, Stacy's operating costs increased considerably. Yet, the chain's profits increased markedly. Which of the following, if true, helps explain this situation?

Question

Quizplus · Accepted Answer

E explains the situation by suggesting that the increase in minimum wage put more money into the hands of Stacy's primary customer base, likely increasing their purchasing power and thus increasing sales and profits for Stacy's despite the rise in operating costs.

Stacy's, a Chain of Discount Stores in Washington, Employs Thousands