Minimum Wage Vs Equilibrium Income

545 Words2 Pages

Wage is the price that employers pay for hiring labor, a minimum wage means that employers are not to pay their employees below that minimum wage. All things being equal the demand and supply of labor determines the equilibrium price. We know that the overall demand for labor is downward sloping, which means that the higher the price of labor the less of it is demanded by employers and vice versa. The supply of labor on the other hand is upward sloping, implying that all things being equal, when the price of labor is high more workers offer their services to employers. If the price of labor is set above the equilibrium price Pe as in fig 1, the demand of labor (a) will be less that its supply (b), there will therefore be excess labor in the

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