Graphical representation of reduction in employment at minimum wage rate.
Explanation of Solution
The reduction in employment when the wage rate is set above the equilibrium is illustrated below:
In Figure 1, the horizontal axis represents the number of skilled labor and the vertical axis represents the wage rate. The equilibrium wage rate is at WE, where the
Demand for labor: Demand for labor is defined as the quantity of labor demanded by the firms at different wage rates.
Supply of labor: Supply of labor refers tp the quantity of labor ready to work at the given wage rate.
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