Which of the following is the most likely outcome of raising the minimum wage?
A)an increase in both the quantity of labor supplied by workers and the quantity of labor demanded by firms
B)an increase in the quantity of labor supplied by workers and a decrease in the quantity of labor demanded by firms
C)a decrease in the quantity of labor supplied by workers and an increase in the quantity of labor demanded by firms
D)a decrease in both the quantity of labor supplied by workers and the quantity of labor demanded by firms

Question

Quizplus · Accepted Answer

According to the law of demand in economics, when the price of a good or service increases, the demand for it decreases. Similarly, when the wage rate (the price of labor) increases, it leads to a decrease in the quantity of labor demanded by firms. As a result, firms may choose to substitute labor with other factors of production (such as capital or technology), reduce the number of workers, or increase the price of their products to cover the higher labor costs.

On the other hand, according to the law of supply, an increase in the wage rate leads to an increase in the quantity of labor supplied by workers. This is because workers would be willing to supply more labor at a higher wage rate as it increases their income and standard of living.

Therefore, the most likely outcome of raising the minimum wage is an increase in the quantity of labor supplied by workers (as they see a higher wage as an incentive to work more) and a decrease in the quantity of labor demanded by firms (as they face higher labor costs). This is represented by option B.

Which of the Following Is the Most Likely Outcome of Raising