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Will wage rates rise or fall? Quantity supplied? Demanded?

Demand and supply conditions in the market for unskilled labor are an important concern to business and government decision makers. Consider the case of a federally-mandated minimum wage set above the equilibrium or market clearing wage level. Some of the following factors have the potential to influence the demand or quantity demanded of unskilled labor. Influences on the supply or quantity supplied can also result. Holding all else equal, describe these influences as increasing or decreasing, and indicate the direction of the resulting movement along or shift in the relevant labor demand and/or supply curve(s). Will wage rates rise or fall?

A. An increase in the popularity of self-service restaurants, gas stations, and so on.

B. A rise in welfare benefits.

C. A decrease in the quality of secondary education.

D. A rise in interest rates.

E. An increase in the minimum wage.

Solution Preview

A. An increase in the popularity of self-service restaurants, gas stations, and so on.

This would decrease the quantity demanded of labor. Less need. This is a shift along the demand curve for labor.

B. A rise in welfare benefits.

This would decrease the quantity of labor supplied. Fewer workers ...

Solution Summary

One or two sentences explains each.

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