Answer to Question #114502 in Microeconomics for thilo

Question

workers who work fewer than 27hrs per week must be paid a minimum of R16.03 per hour.
workers that works more than 27hrs per week must paid minimum of R13.69 per hour.
a domestics worker who works 45hrs per week will now earn a min of R2669.24 per month
With the aid of a diagram,discuss the welfare effect of this new legislation ,if the new min wage is
1.below the equilibrium wage
2.above the equilibrium wage rate with labour hours as the quantity variable

Answer 1

1. If the minimum wage is established below the equilibrium, then there will be no impact on the labor market equilibrium.

2. If the minimum wage is established above the equilibrium, then the quantity supplied will exceed the quantity demanded and less workers will be employed.