Which of the following is the most likely outcome of a decrease in the minimum wage?...

Which of the following is the most likely outcome of a decrease in the minimum wage? Please also provide an explanation.

a) an increase in the number of unskilled workers who are involuntarily unemployed

b) an increase in the number of people who are voluntarily unemployed

c) a shift to the right of the demand for unskilled workers

d) a shift to the left of the supply of skilled workers e) a shift to the left of the supply of unskilled workers

Solutions

Expert Solution

Option C.

A minimum wage is generally said to rise unemployment within an economy.
When this minimum wage falls, the wage rates of unskilled workers would also fall below a level that was originally established due to some market forces.
This will increase the demand for unskilled labour within the market and the quantity of unskilled labour hired will rise.
Hence the the demand for unskilled workers shifts to the right.

Rahul Sunny answered 1 year ago

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