Under What Circumstances Might a Binding Minimum Wage Be Effective

question 95

Multiple Choice

Under what circumstances might a binding minimum wage be effective in easing the burden on the poor?

• A) only if the demand for unskilled labour is relatively elastic
• B) only if the demand for unskilled labour is relatively inelastic
• C) only if the minimum is substantially above the equilibrium wage rate
• D) only if it doesn't increase the firm's marginal cost

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Definitions:

Nonnegative Amounts

Quantities that are greater than or equal to zero, often used in mathematics and economics.

Budget Line

A graphical representation of all possible combinations of two goods that can be purchased with a given budget at set prices.

Prices Double

A situation where the price level of goods or services increases by 100 percent, leading to potential adjustments in consumer behavior and market dynamics.

Income Triples

A scenario in which an individual's or household's income increases to three times its original amount.