In the diagram above what happens when the minimum wage is fixed at OW?
Question 1 Report
In the diagram above what happens when the minimum wage is fixed at OW?
Answer Details
In the given diagram, when the minimum wage is fixed at OW, the actual wage rate for the workers will increase from W1 to W2. This increase in wage rate will encourage more workers to supply their labor in the market, while at the same time, firms will be discouraged from hiring as many workers as before due to the higher cost of labor. As a result, the quantity of labor demanded (Q1) will be less than the quantity of labor supplied (Q2), leading to a surplus of labor, which is commonly known as unemployment. Therefore, the correct answer is "Unemployment results."
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