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JAMB Economics 1989 Question 11

Question 11

Labour Market

In the diagram above, what happens when the minimum wage is fixed at OW?

Diagram for this question
  1. A.Unemployment is reduced
  2. B.Unemployment results
  3. C.The demand schedule will shift
  4. D.The supply schedule will become steeper.
Show the answer and explanation

Answer: B (Unemployment results)

Explanation

OW is above the equilibrium wage, so more people want work than employers want to hire. The surplus labour is unemployment.