Answer to Question #88964 in Microeconomics for Phindile

Question

In the labour market for carpenters, the current market clearing wage rate is R800 per day. Wth the aid of a diagram, discuss the welfare effects of gover

Answer 1

Such government intervention will create a surplus of carpenters because the quantity of labour demanded will be lower than the quantity of labour supplied. Moreover the total surplus will decrease because the deadweight loss occur, that’s why the labour market for carpenters will be inefficient.