Question

On July 24, 2009, the federal minimum wage rose to $7.25 per hour for most occupations in the private sector. While many statesand cities have set their own minimum wage above this federal level, and 18 states raised their minimum wage on January 1, 2018, the federal minimum wage has remained at $7.25 per hour. Over the past several years, support for an increase in the federalminimum wage has come from a wide variety of sources. Many of those who support an increase in the minimum wage believe this is one way the government should exercise its social responsibility in an attempt to reduce poverty. The following items address the idea of raising the minimum wage from the current federal minimum of $7.25 per hour.

1) Minimum wage is a price floor, so discuss an increase in theminimum wage from a supply and demand standpoint, making sure to address the concept of surplus with respect to the quantity of labor supplied and the quantity of labor demandedthat is generated by this price floor.

2) What will be the impact on the prices of the products produced by workers working at or near the minimum wage level, and how will this affect overall consumer purchasing?

Answer 1