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-(Figure: The Minimum Wage) Use Figure: The Minimum Wage.What is the quantity of labour demanded at a binding minimum wage of P₃?

Question

Use the following to answer questions:

-(Figure: The Minimum Wage) Use Figure: The Minimum Wage.What is the quantity of labour demanded at a binding minimum wage of P₃?

Quizplus · Accepted Answer

At a binding minimum wage of P3, the quantity of labour demanded is Q1. This is because the minimum wage is above the equilibrium wage, so firms will only hire workers up to the point where the marginal cost of labour (which is equal to the minimum wage) is equal to the marginal revenue product of labour.

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