Question

a firm can either use their own employees to keep the office clean or hire a...

a firm can either use their own employees to keep the office clean or hire a cleaning s service to do it. Assume an increase in the minimum wage increases the hourly wage cleaning services must pay their employees. What is the predicted effect of this on the price and quantity of cleaning service market? the market is perfectly competitive

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Answer #1

Perfect competition is the form of the market where there are many buyer and seller who is selling goods and service and in this form of the market, the price of goods and services determine by market forces of demand and supply or determine by industry.

As in the question, it is talking about Firm Not The Firms. Firm means individual unit and Firms means Group of the individual unit that is Industry.

So, Individual firm increases the minimum wages of the person who is working infirm it does not have any effect on the industry and the whole market but it will affect the price and quantity of individual firm. As minimum wage increases which leads increase in the Cost of Production and it affects the supply curve and Supply curve shift leftward and Price Increases and Quantity decreases.

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