If the minimum wage is above the equilibrium wage,a.anyone who wants a job at the minimum wage can find one.b.the quantity demanded of labor will equal the quantity supplied.c.the quantity demanded of labor will be less than the quantity supplied.d.the quantity demanded of labor will be greater than the quantity supplied.
Question
If the minimum wage is above the equilibrium wage,a.anyone who wants a job at the minimum wage can find one.b.the quantity demanded of labor will equal the quantity supplied.c.the quantity demanded of labor will be less than the quantity supplied.d.the quantity demanded of labor will be greater than the quantity supplied.
Solution
The correct answer is c. the quantity demanded of labor will be less than the quantity supplied.
Here's why:
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The equilibrium wage is the wage at which the quantity of labor demanded by employers equals the quantity of labor supplied by workers.
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If the minimum wage is set above the equilibrium wage, it means that employers are required to pay more for labor than they would at the equilibrium wage.
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As a result, employers will demand less labor because the cost of labor has increased. This means the quantity demanded of labor decreases.
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On the other hand, because the wage is higher, more workers will be willing to supply their labor. This means the quantity supplied of labor increases.
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Therefore, at a minimum wage above the equilibrium wage, the quantity demanded of labor will be less than the quantity supplied. This can lead to unemployment because there are more workers willing to work at the minimum wage than there are jobs available at that wage.
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