The extent to which minimum wage laws cause unemployment depends on how far _____ equilibrium the wage is set and on _____.
A)above; whether the slope of the labor demand curve is positive
B)below; the degree of worker commitment
C)above; the elasticity of labor demand
D)below; the number of workers in the market

Question

Quizplus · Accepted Answer

The extent to which minimum wage laws cause unemployment depends on how far above equilibrium the wage is set and on the elasticity of labor demand. If the wage is set too high above the equilibrium wage, it will result in a surplus of labor and lead to unemployment. The more elastic the labor demand is (meaning that employers can easily substitute other factors of production for labor), the greater the unemployment effect will be. Therefore, a high elasticity of labor demand is an important factor in determining the impact of minimum wage laws on unemployment.

The Extent to Which Minimum Wage Laws Cause Unemployment Depends