Minimum wage

Question 1

Min. wage diagram

Answer 1

Question 2

min. wage analysis

Answer 2

• raises wage rate
• employers must now pay workers wmin or above
• new labour supply
• employment fall ql1 to qd1
• caused by a free market wage
• correction = more allocatively efficient
• reduce welfare loss

Question 3

ignore this

Answer 3

• encourages willingness to supply higher price
• ensure minimum price for suppliers

Question 4

evaluation of minimum wage

Answer 4

• not necessarily cause une,ployment if productivity increases increased wages and increased employment
• rise in firms cost of production some firms leave
• extent of unemployment dependent on level of wage