What 4 outcomes will a binding minimum wage have, and what 1 outcome has 2 possibilities.

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Expert Solution

There are 2 major outcomes of binding minimun wage are:

1 The Labour Market due to the minimum wage

labour market, has an equilibrium wage. Equilibirium wage is a point where the demand and supply lines on the minimum wage graph intersect & the rate of pay is equivalent to that of the quantity of hours worked/required. A binding minimum wage in a competitive labour market means that the rate of pay must rises. When the rate of pay has increased, and all employees are being paid a higher wage, the hiring company cannot afford to hire as many employees as it will be too expensive, because not only do they have to pay wages for the skilled jobs, they also have to pay a higher wage than they would have intended for workers to perform the lower skilled jobs.

2 Inefficiency of the Labour market due to the minimum wage?

Labour market is inefficient due to minimum wage because a deadweight loss is present. This occurs because of a decrease in both the workers surplus and the company's surplus.

Rahul Sunny answered 1 year ago

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