In advance of the recent increase in the U.S.
minimum wage rate,the government of the state
of Arizona decided to boost its own minimum
wage by an additional$1.60 per hour.This
pushed the wage rate earned by Arizona teenag
ers above the equilibrium wage rate in the teen
labor market.What is the predicted effect of this
action by Arizona's government on each of the
a.The quantity of labor supplied by Arizona
b.The quantity of labor demanded by employers
of Arizona teenagers
c.The number of unemployed Arizona teenagers
Demand will fall, supply rise, unemployment increase.
The minimum wage rate is increased above the equilibrium level.
Since, the wage rate is above equilibrium level, supply of labor will increase as more people would want to work at the prevailing high wage rate.
The demand however will reduce for labor as labor has become expensive due to increased wage rate. Hence, the demand shall fall.
The unemployment is the number of people looking for job (supply) minus number of people actually getting the job (demand).
Since the demand has fallen and supply risen, the difference between the two, i.e., unemployment will rise.
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