If the demand for labor is inelastic then the unemployment caused by raising the minimum wage is
A)less than if it were elastic.
B)the same as if it were elastic.
C)more than if it were elastic.
D)unrelated to labor demand elasticity.

Question

Quizplus · Accepted Answer

If the demand for labor is inelastic, it means that the quantity demanded of labor does not change much with changes in the wage rate. In this case, raising the minimum wage will not cause a significant decrease in the demand for labor, and therefore there will be only a small increase in unemployment. On the other hand, if the demand for labor is elastic, then a small increase in the wage rate will cause a significant decrease in demand for labor, leading to a higher level of unemployment. Therefore, the unemployment caused by raising the minimum wage is less if the demand for labor is inelastic.

If the Demand for Labor Is Inelastic Then the Unemployment