Question

(1) What is the impact of a minimum wage above the equilibrium wage on the quantity of labor supplied and demanded? (Practice drawing a supply and demand graph that shows this. Notice how the impact is affected if the supply curve is flatter or steeper, i.e., more elastic or inelastic. I will post the graph(s) to this discussion thread, after your initial responses are due. You need not submit any graphs in this Discussion Topic post, but you may find it helpful to draw them and refer to them in your response.) (2) Should our government require employers to pay their workers at least some minimum (or living) wage? If so, why, and how high should the minimum wage be? Who wins and who loses from minimum wage laws? Can you think of a better way our government can help low-income workers?

Answer 1

1.

When minimum wage is set above equilibrium wage, then it creates excess supply in the market or surplus in the market of labor. It happens, because minimum wage above the equilibrium is binding in nature and supply of labor is high at this minimum wage, but demand of workers decrease at this level of wage. It will make surplus of the workers in the labor market. Surplus is created in the market, because firms demand less of the workers to offset the excess cost incurred due to paying of the minimum wage. It is illustrated as follows.

Further, if the demand curve of workers is flatter, then it is more elastic in nature and firms will be more responsive to the increase in wage rates. Rather, the steeper demand curve, will cause insensitive demand of the workers and firms will be less responsive to the increase in wages.

Pl. repost other discussion question for their proper answers!