Using an appropriate illustration explain the impact of the minimum wage in the labour market
A market is a place where the buyers and the sellers interact with each other and the exchange of goods and services takes place between the at a mutually agreed price level. This equilibrium wage and the quantity will be determined at the intersection of the demand for and supply of the currency in the market. Thus, the equilibrium wage and quantity will be determined by the market.
The market for labor is the place where the people sell their labor power to the firms and the firms pay back with the wages to the laborers. The equilibrium in the economy is obtained at the intersection of the demand for labor and the supply of labor in the economy. The minimum wage law is determined by the government which states that the employers should pay the employees the government determined minimum wage when employing the labor for the process of production. The minimum wage should be determined above the market equilibrium wage in order to be a binding wage rate. Otherwise, the market equilibrium wage rate will prevail and the minimum wage will not be binding.
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