In a competitive labor market, if the Illinois government imposes a minimum wage that is above...

In a competitive labor market, if the Illinois government imposes a minimum wage that is above the market equilibrium wage, how does the minimum wage affect the amount of labor hours done by workers?

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Expert Solution

If the government has put up a minimum wage on the market that is above the equilibrium wages that means it will be effective and the producer in the market will be forced to pay a higher wage to the people, but as they cannot increase the price of the goods they will fire some of the people in the market.

Minimum wage laws will increase the supply of the labor and decrease the demand, that will reduce the labor hour worked. This will overall lead to an increased unemployment.

Rahul Sunny answered 1 year ago

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