Question

How might an increase in the minimum wage affect labor supply?

Answer 1

The government of almost all countries has various policies to support the laborers of the country and to ensure that all the laborers of the country get reasonable wages for their work government fix the minimum amount of wages that all the firms have to pay to their labors.
However, an increase in the rate of minimum wages that firms have to pay to their labors has a change in the mechanism of the market. An increase in the minimum wage will stimulate more laborers to work as there will be many workers at the old rate of the minimum wage that was not interested to work but due to the increase in the minimum wage, those workers will also feel the desire to work. So, there will be more workers in the market able to supply labor than the number of workers required in the market.
The firms in the market will also react towards the increase in the minimum wages. Due to this change in the minimum wages, the firms will try various ways to reduce their demand for laborers as this will increase the cost that they have to incur during production. If any firm is not able to reduce their demand for labor then they have to incur more cost than before during production due to which they will charge more amounts for their products.