Minimum wages create unemployment in markets where they create a

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Business

Veronica Dickerson

9 September, 18:01

Minimum wages create unemployment in markets where they create a

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Answers (1)

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Lauryn Steele · Answer 1

a binding price floor which results in an excess supply of labor and a decrease in the quantity demanded.

Explanation:

When a minimum wage is set below the equilibrium wage, then it will have absolutely no effect in the labor market. But when it is set above the equilibrium wage, it will cause an excess supply of labor and a decrease in the quantity demanded of labor resulting in a deadweight loss or a loss of total economic efficiency. This means that more people will want to work but less employers will hire workers.