Answer to Question #111243 in Macroeconomics for Bulie

Question

With the aid of a diagram, discuss the welfare effect of this new legislation if the new minimum
wage is (1) below the equilibrium wage and (2) above the equilibrium wage rate with labour
hours as your quantity variable.

Answer 1

1.if the minimum wage is lower than the equilibrium wage, then we can talk about improving welfa

2.if the minimum wage is higher than the equilibrium wage, then we can talk about a decrease in welfare