An increase in the minimum wage will cause a relatively large increase in unemployment among ?
Correct answer: B. unskilled workers if the demand for labour is relatively elastic
- A. unskilled workers if the demand for labour is relatively inelastic
- B. unskilled workers if the demand for labour is relatively elastic
- C. skilled workers if the demand for labour is relatively elastic
- D. skilled workers if the demand for labour is relatively inelastic
Explanation
When labour demand is elastic, employers reduce employment substantially after the wage rises. Therefore, a minimum-wage increase produces the largest unemployment effect among unskilled workers when demand for their labour is elastic.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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