Question

Figure 20-1 Price (dollars per hour) $8.00 6.50 5.00 0 8 10 12 Labor (millions of workers) 47) Refer to Figure 20-1. Based on the graph of the labor market above, if a minimum wage of $8 per hour is imposed, which of the following will result? A) The quantity of labor demanded by firms will rise. B) The quantity of labor demanded by firms will fall. C) The unemployment rate will fall D) Both A and C will occur. 48) Refer to Figure 20-1. Based on the graph of the labor market above, if a minimum wage is set at $5 per hour, which of the following will occur? A) The unemployment rate will fall. B) The level of unemployment will rise, but the percentage of the labor force unemployed will not change. C) The unemployment rate will rise. D) None of the above will occur.

in this question,i thought at minimum wage rate 8$ rate there is more people to apply to jobs,but at 5$ people are more reluctant to apply for jobs,so 8$ labor force increases but at 5$ unemployment rate would increase.
Is this approach true? Which variables ffected by setting minimum wage price in macroeconomics? Thank you

Answer 1

Question 47) option B)

Since equilibrium wage is 6.5, where demand cuts the Supply curve, so now minimum wage is now higher than equilibrium level, thus firm will tend to hire less Labor , since Labor cost has risen ., Thus labor demand will fall , so unemployment will rise.

Question) 48, option d)

Now minimum wage is below Market equilibrium wage level, thus minimum wage is non binding , thus both unemployment rate & wage rate remain unaffected, hence non binding minimum wage is irrelevant .

Bcoz Labor wants at least minimum wage should be given.

Your approach is wrong, minimum wage legislations affect the Labor demand & not labor supply.

& Minimum wage legislations affect the unemployment rates & equilibrium wage level