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A Study of the Effects of the Minimum Wage on Employment

question 248

Essay

A study of the effects of the minimum wage on employment of low-skilled workers estimated the price elasticity of demand for low-skilled workers is -0.75.Suppose that the government is considering raising the minimum wage from $7.25 per hour to $7.75 per hour.Based on this information, calculate the percentage change in the employment of low skilled workers.Use the midpoint formula.


Definitions:

Disinflation

The process of slowing down the rate of inflation, resulting in a decrease in the general price levels of goods and services over time.

Inflation

The frequency at which the overall pricing of goods and services heightens, eroding the ability to buy.

Price Level

A measure indicating the average price of goods and services in an economy, often compared over time to assess inflation or deflation.

Inflation

The rate at which the cost of goods and services goes up, thereby reducing the purchasing capacity.

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