Why do some workers lose their job when the minimum wage is increased?
A) The increase in labor costs decreases the supply of the product, thereby raising the price of the good so that the equilibrium quantity decreases to zero.
B) The increase in the minimum wage decreases the quantity of labor demanded.
C) The demand for labor is perfectly inelastic.
D) The supply of labor decreases.
E) The demand for labor is perfectly elastic.

Question

Quizplus · Accepted Answer

When the minimum wage is increased, it raises the cost of labor for employers. As a result, employers may reduce the number of workers they hire or even let some workers go in order to offset the increased costs. This is because the demand for labor is not perfectly inelastic, meaning that as the wage rate increases, employers may substitute other inputs (such as automation or outsourcing) or reduce production to offset the increased costs. Therefore, choice B is the best answer.

Why Do Some Workers Lose Their Job When the Minimum