An effective minimum wage policy in a competitive market will increase unemployment and increase the total earnings of labor only if the demand for labor is A) relatively inelastic B) relatively elastic C) unit elastic D) greater than the supply E) positively related to the wage rate

An effective minimum wage policy in a competitive market will increase unemployment and increase the total earnings of labor only if the demand for labor is A) relatively inelastic B) relatively elastic C) unit elastic D) greater than the supply E) positively related to the wage rate

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter20: Unemployment

Section20.3: Minimum-wage Laws

Problem 3QQ

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Question

MICROECONOMICS

An effective minimum wage policy in a competitive market will increase unemployment and increase the total earnings of labor only if the demand for labor is
A) relatively inelastic
B) relatively elastic
C) unit elastic
D) greater than the supply
E) positively related to the wage rate

Please EXPLAIN in depth why relatively inelastic is the CORRECT answer.

Please EXPLAIN in depth why relatively elastic is the INCORRECT answer.

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