The rising minimum wage allegedly has reduced the quantity demanded of teenage labor. However, demographics slightly reduced the supply of teenage labor. The U.S. Department of Labor reported that teenage unemployment is an increasing problem. Which graph in Figure 4-10 is consistent with these facts?
A)1
B)2
C)3

Question

The rising minimum wage allegedly has reduced the quantity demanded of teenage labor. However, demographics slightly reduced the supply of teenage labor. The U.S. Department of Labor reported that teenage unemployment is an increasing problem. Which graph in Figure 4-10 is consistent with these facts?
A)1 
B)2 
C)3

Quizplus · Accepted Answer

Graph #3 shows a decrease in the supply of teenage labor (shift leftward of the supply curve), which is consistent with the demographic change. The increase in the minimum wage would cause a further decrease in the quantity demanded of teenage labor, but the effect may not be large enough to reverse the overall trend of rising teenage unemployment. Graph #1 shows an increase in the quantity supplied (shift rightward of the supply curve), which contradicts the demographic trend. Graph #2 shows a decrease in both supply and demand, which is not consistent with the assertion that the minimum wage increase is the main cause of the reduction in employment. Graph #4 shows a reduction in the minimum wage, which is not consistent with the given information.

The Rising Minimum Wage Allegedly Has Reduced the Quantity Demanded