Studies of the Minimum Wage Suggest That the Price Elasticity

question 295

Multiple Choice

Studies of the minimum wage suggest that the price elasticity of demand for teenage workers is relatively inelastic. This means that

• A)an increase in the minimum wage would increase the total incomes of teenage workers as a group.
• B)an increase in the minimum wage would decrease the total incomes of teenage workers as a group.
• C)the unemployment effect of an increase in the minimum wage would be relatively large.
• D)the cross elasticity of demand between teenage and adult workers is positive and very large.

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Definitions:

Compensating Balance

A minimum account balance that a borrower is required to maintain as a condition of borrowing from a lender, often used to offset the cost of maintaining the loan.

Accounts Payable Period

The average time it takes for a company to pay off its suppliers.

Credit Sales

Transactions in which goods or services are provided to a customer with the agreement that payment will be made at a later date.

COGS

Stands for Cost of Goods Sold, which represents the direct costs attributable to the production of the goods sold by a company, including materials and labor.