Question

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​ $1.60 per hour. This pushed the wage rate earned by Arizona teenagers 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​ following?

a. The quantity of labor supplied by Arizona teenagers
b. The quantity of labor demanded by employers of Arizona teenagers.
c. The number of unemployed Arizona teenagers
d. Please draw demand curve, supply curve and unemployment of question a, b and c on a graph.

Answer 1

a) An increase in the minimum wage rate above the equilibrium level will increase the number of Arizona teenagers shifting the labor supply curve towards its right.

b) As the wage rate has increased the employers of Arizona will demand less labor, this decreases the quantity of labor demanded. Hence a movement along the labor demand curve occurs.

c) As the supply of labor (Arizona teenagers) is far more than the labor market demand, there will be a surplus in the market creating more unemployment.