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From an economic standpoint, evaluate the effect of a minimum wage on the market for low-wage...

Question:

From an economic standpoint, evaluate the effect of a minimum wage on the market for low-wage labor. Include the following:

Discuss what economic theory predicts will happen

Draw a supply and demand graph illustrating the effect of a minimum wage

Discuss what elasticity conditions would economic theory prove to be true or false.

Minimum wage:

It is a government regulation which sets the minimum wages paid to the workers above the equilibrium wage in the market. This is done to benefit the workers. Setting a wage regulation creates excess supply of workers in the labour market as more workers enter the workforce due to higher wages.

Answer and Explanation: 1

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From the graph below it is clear that the equilibrium wage rate is w1 and the equilibrium labour is L1. Now, if the minimum wage is fixed at MW, which...

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What is a Minimum Wage? - Definition & History

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Chapter 7 / Lesson 12
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Understand the minimum wage definition in economics. Discover the history of minimum wage in the U.S., and explore the advantages and disadvantages of imposing a minimum wage. Learn the difference between federal and state minimum wage.


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