Let's say that an economist conducts a study about the minimum wage in a certain area. His statistics show that after the government increased the minimum wage, there was no negative effect on unemployment (unemployment did not increase). From this we can conclude that:

Question

Avery Garrett

Business

3 June, 22:35

Let's say that an economist conducts a study about the minimum wage in a certain area. His statistics show that after the government increased the minimum wage, there was no negative effect on unemployment (unemployment did not increase). From this we can conclude that:

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Answers (1)

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Belen Arnold · Answer 1

That the prior minimum wage level was below the equilibrium wage level, and the new minimum wage is lower or equal to the equilibrium wage.

Explanation:

The minimum wage acts like a price floor for wages, and any price floor that is set above the equilibrium price will lead to an increase in the quantity supplied but a decrease in the quantity demanded. This results in a deadweight loss since the equilibrium quantity and price are not reached.

But in this case, if the higher minimum wage didn't result in a decrease int he quantity demanded of labor, that means that the new minimum wage is still lower or equal to the equilibrium wage.