Answer to Question #111571 in Microeconomics for Busisiwe

Question #111571
Please explain how you go about in answering - this 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
1
Expert's answer
2020-04-24T11:05:55-0400

If the new legislation imposes a minimum wage that is above the equlibrium, it creates a gap between the quantity demanded and the quantity supplied.This is becausefirms wish to purchase only fewer hours of labor—firms want to hire fewer labour hours. In a market with voluntary trade, no one can force firms to hire workers. This surplus is known as unemployment. At the high minimum wage, we would have more workers wanting to work than we would have firms wanting to employ them.












Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS