Suppose there is no official minimum wage and the lowest-paid workers receive $16.00/hr. If the government...
Suppose there is no official minimum wage and the lowest-paid workers receive $16.00/hr. If the government then enacts a minimum wage of $10.00/hr, will it have any effect? Why or why not?
Homework Answers
The minimum wage imposition is kind of government intervention
in the market. If there is a situation according to the government
where the workers are not getting their fair share of benefits then
the government can impose a minimum wage in the market. This is
similar to price floor situation in which buyer will have to pay a
minimum amount equal to price floor decided by the
government.
The price floor should be set above the current equilibrium point
because if the price floor is set below that then it will be
ineffective. It is because the market is already paying more than
price floor.
In the above situation, if the equilibrium minimum wage is
$16.00/hr then imposing $10.00/hr will have no effect as it is
below the equilibrium level.
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Suppose there is no official minimum wage and the lowest-paid
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