The supply curve corresponds to the supply of labor and the demand curve is the demand for labor. The wage is set at Wmin, a level higher than the market clearing wage W0, that would prevail in an unregulated labor market. As a result, those workers who can find jobs can obtain a higher wage. However, some people who want to work would be unable to do so. Thus the policy results in unemployment of L2 - L1 & in deadweight loss given by the triangles B and C.
Saturday, August 27, 2011
Minimum prices: The minimum wage
The supply curve corresponds to the supply of labor and the demand curve is the demand for labor. The wage is set at Wmin, a level higher than the market clearing wage W0, that would prevail in an unregulated labor market. As a result, those workers who can find jobs can obtain a higher wage. However, some people who want to work would be unable to do so. Thus the policy results in unemployment of L2 - L1 & in deadweight loss given by the triangles B and C.
0 comments:
Post a Comment