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Minimum wage


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#1 ish@

ish@

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Posted 12 March 2015 - 08:26 PM

An increase in the minimum wage:

I.

Will move employers down the labor demand curve, causing the quantity of labor demanded to fall.

II.

Is likely to increase the supply of labor, as more people will be willing to work for the higher wage.

a.

Only II.

b.

Only I.

c.

Both I and II.

d.

Neither I nor II.

 
Explanation

Choice "d" is correct; neither statement I nor statement II are correct. Statement I is incorrect, as an increase in the minimum wage will move employers up, not down, the labor demand curve, causing the quantity of labor demanded to fall. Statement II is incorrect, as an increase in the minimum wage leads to a decrease in the quantity demanded of labor and an increase in the quantity supplied of labor. It does not increase the supply of labor, only the quantity supplied of labor.

Choices "b", "a", and "c" are incorrect, per the above

 

 

Answer says that it does not increases supply of labor but increases only quantity supplied of labor, Can anyone explain why? because one of the factor which lead to change in supply i.e shift in supply curve is Change in Production Cost and minimum wage is a production cost... I selected correct answer A, correct answer is D....