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A minimum wage increases unemployment by A. shifting the labor supply curve rightward and shifting the...

A minimum wage increases unemployment by

A.

shifting the labor supply curve rightward and shifting the labor demand curve leftward.

B.

shifting only the labor supply curve rightward.

C.

increasing the quantity of labor demanded.

D.

decreasing the quantity of labor demanded.

E.

shifting only the labor demand curve leftward.

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Answer #1

A minimum wage increases unemployment by decreasing the quantity of labor demanded and increasing the quantity supplied. The labor supply will increase considering the binding minimum wage which is higher than the equilibrium wage. The firms will employ less at minimum wage. There will be shortage of jobs due to excess supply of labor in the market and thus unemployment will rise.

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