Answer to Question #87551 in Microeconomics for Vijay Thambiran

Question

Suppose the minimum wage is above the equilibrium wage in the market for unskilled labour. Using relevant diagrams and hypothetical numbers of the unskilled labour market show the potential impact on the labour market

Answer 1

If the minimum wage is above the equilibrium wage in the market for unskilled labour, then there will be a surplus of labour, because the quantity supplied will be higher than the quantity demanded, so the labour market will become inefficient.