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Answer to Question #115132 in Microeconomics for SIHE MABIKA
Question #115132
With the aid of a diagram , discuss the welfare effect of this new legislation if the new wage is below equilibrium and above wage rate with labour hours as quantity varaiable.
Expert's answer
If wages are lower than equilibrium, then the demand for labor is much higher than supply, since for low wages few workers will agree to perform the specified amount of work. If wages are higher than equilibrium, then the demand for labor is much less than supply, because with high wages, only a few entrepreneurs will be able to pay for this labor.
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