ECON 101 2Midtermreview

The tax revenue takes part of the total surplus the

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Unformatted text preview: rate, it has no effect. The market works as if there were no minimum wage. Ø། If the minimum wage is set above the equilibrium wage rate, it has powerful effects. Ø། If the minimum wage is set above the equilibrium wage rate, the quantity of labour supplied by workers exceeds the quantity demanded by employers. Ø། There is a surplus of labour. Ø། The quantity of labour hired at the minimum wage is less than the quantity that would be hired in an unregulated labour market. Ø། Because the legal wage rate cannot eliminate the surplus, the minimum wage creates unemployment • The equilibrium wage rate is $6 an hour. • The minimum wage rate is set at $7 an hour. • So the equilibrium wage rate is in the illegal region. • The quantity of labour employed is the quantity demanded. Minimum Wa...
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This note was uploaded on 03/29/2014 for the course ECON 101 taught by Professor Vanderwaal during the Spring '08 term at Waterloo.

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