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8. Discuss the effects of minimum wages on labor supply and demand.

8. Discuss the effects of minimum wages on labor supply and demand.

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An effective minimum wage is always set above the equilibrium wages in the market. At the equilibrium the demand and the supply are equal. Above that wage the supply of the labor will increase and the demand for the labor will decrease. It will lead to a surplus of the labor in the market and cause unemployment.

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