Microeconomics Assignment: Minimum Wage Impact and Analysis

This microeconomics assignment explores the effects of minimum wage policies on the labor market. The assignment examines how an increase in the minimum wage, above the equilibrium wage, leads to an excess supply of labor due to the increased wage rate. This causes a gap between labor supply and demand, resulting in a deadweight loss where neither the laborers nor the producers benefit. The assignment references the impact on both laborers and producers, highlighting that the policy change may not achieve its goals due to potential job losses. The assignment also references relevant economic principles and sources. The assignment emphasizes the importance of understanding the implications of minimum wage on the labour market and the economy as a whole.

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MICROECONOMICS ASSIGNMENT

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Contents
Effects of raising the minimum wage........................................................................................3
Reference....................................................................................................................................4

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Effects of raising the minimum wage
If the minimum wage is increased more than the equilibrium wage determined by the labour
demand and labour supply curve there would be an excess supply of labour in the market. As
the wage is more than the equilibrium wage rate, at this rate the labours would be willing to
supply more labours and at the same time the employers or the producers in this case would
demand less of labours due to the increased wage (Greenlaw, Shapiro & Taylor, 2018).
Therefore, the labour market will see a huge gap between labour supplied and labour
demanded leading to an excess supply in the market. Due to the deadweight loss, both the
labours and the producers of the market lose their surplus. Consequently, there arrives an area
in the market where a part of the surplus is neither owned by neither the labours nor the
employers of the market. This area is called the dead weight loss which is lost from the social
welfare as whole (Dean et al. 2017). The policy change does not achieve its goals as most of
the labours lose their job due to the imposition of the minimum wage that increases the cost
of production for the producers of the market.

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Reference
Dean, E., Elardo, J., Green, M., Wilson, B., & Berger, S. (2017). Principles of
Microeconomics-Scarcity and Social Provisioning, pp.111-145.
Greenlaw, S. A., Shapiro, D., & Taylor, T. (2018). Principles of Economics-2e: OpenStax,
pp. 85-89.