Answer to Question #123166 in Microeconomics for Nyasha Masiraha

Question

Discuss the welfare effect of setting a minimum wage of $13/ hour above or below the equilibrium wage

Answer 1

If the minimum wage of $10/ hour is set below the equilibrium wage , it has no effect. The market works as if there were no minimum wage.

But if the minimum wage is set above the equilibrium wage rate, the quantity of labor supplied by workers exceeds the quantity demanded by employers. There is a surplus of labor.