Figure 5.1 Alt text for Figure 5.1: In figure 5.1, a graph of the labour market.
Long description for Figure 5.1: The x-axis is labelled, labour (millions of workers).The y-axis is labelled, wage (dollars per hour), ranging from 0 to 28 in increments of 2.2 intersecting lines are shown.A line slopes down from the top left of the quadrant, near the value 24 on the y-axis, to the bottom right corner, near the end of the x-axis.A second line slopes up from the bottom left corner of the quadrant, near the origin, to the top right corner.4 points plotted along the 2 sloping lines, and the point of intersection of the 2 lines, are connected to the corresponding values on the x-axis, and to the values 10, 13 and 16 on the y-axis.
-Refer to Figure 5.1.Based on the graph of the labour market above, if a minimum wage of $16 per hour is imposed, which of the following will result?
A)The quantity of labour demanded by firms will rise.
B)The quantity of labour demanded by firms will fall.
C)The unemployment rate will fall.
D)The quantity of labour supplied by households will fall.
E)Both A and C will occur.

Question

Figure 5.1  Alt text for Figure 5.1: In figure 5.1, a graph of the labour market.
Long description for Figure 5.1: The x-axis is labelled, labour (millions of workers).The y-axis is labelled, wage (dollars per hour), ranging from 0 to 28 in increments of 2.2 intersecting lines are shown.A line slopes down from the top left of the quadrant, near the value 24 on the y-axis, to the bottom right corner, near the end of the x-axis.A second line slopes up from the bottom left corner of the quadrant, near the origin, to the top right corner.4 points plotted along the 2 sloping lines, and the point of intersection of the 2 lines, are connected to the corresponding values on the x-axis, and to the values 10, 13 and 16 on the y-axis.
-Refer to Figure 5.1.Based on the graph of the labour market above, if a minimum wage of $16 per hour is imposed, which of the following will result?
A)The quantity of labour demanded by firms will rise. 
B)The quantity of labour demanded by firms will fall. 
C)The unemployment rate will fall. 
D)The quantity of labour supplied by households will fall. 
E)Both A and C will occur.

Quizplus · Accepted Answer

From the graph, we can see that the point where the quantity of labour demanded equals the quantity of labour supplied is at a wage rate of $10 per hour. When the minimum wage is increased to $16 per hour, the wage rate is above the market equilibrium wage, which means that the quantity of labour demanded by firms will fall as they are no longer willing to pay the higher wage rate for the same quantity of labour. This will lead to a decrease in employment and an increase in unemployment, so choice B is the correct answer.

Figure 51 Alt Text for Figure 5