Answer to Question #95580 in Microeconomics for Philtricia Mayindi

Question

With the aid of a diagram, discuss the welfare effects of such a policy if the wage rate set is above the market clearing wage rate (assuming this is R12 per hour).

Answer 1

Welfare is a sum of surpluses(consumers and produsers).

So, we can see on a diagram, that setting higher minimum wage that equilibrium will cause decrease in welfare.