Answer to Question #223973 in Macroeconomics for Vanessa

Question

What is the effect on demand for labour and supply for labour,if government impose a minimum wage below the market wage

Answer 1

A minimum wage below the market wage implies an increase in the level of minimum wage.

Unemployment level will be cut down because more people will get job opportunities.This shows that the demand for labor will increase.

Supply for labor will however decrease because many employees will not be willing to work at a wage rate that is lower than the market wage.