Question 50
Labour MarketUse the diagram below to answer the question.
From the diagram above, the minimum wage OW will lead to
- A.full employment of resources
- B.unemployment
- C.inflation
- D.full employment of factors of production.
Show the answer and explanation
Answer: B (unemployment)
Explanation
At wage OW more people want to work than firms want to hire, because the wage is above equilibrium. The excess supply of labour is unemployment.