Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 4, Problem 6QAP
To determine

Describe the effect of nature of the demand curve in policy-making.

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The data shows that an increase in the Provincial Minimum Wage of 60% in City A in 1999 did not lead to an increase in unemployment. On the other hand, the same amount of increase in the Provincial Minimum Wage in City B actually causes the number of unemployed to increase. According to one economist, this is because the calculation of the increase in the Provincial Minimum Wage in City B does not pay attention to the amount of wages that should apply, so that it is burdensome for entrepreneurs and they are forced to lay off their workers. You are asked to provide a theoretical basis (with a labor supply-demand curve) why an increase in the minimum wage in City A and City B, despite having similar increases, has different effects.
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