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Many states have increased their state's minimum wage recently. Based on the material learned this week...

Many states have increased their state's minimum wage recently. Based on the material learned this week please answer how this increase would impact the labor market and other markets in those states? Please provide your reasoning.

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Answer #1

As the graph here shows, an increase in the wage will be effective if it pushes the wage above the equilibrium level, that will increase the supply of labor in the market and decrease the demand, causing a surplus of labor in the market. Here, the equilibrium wage is at Pm and new increased minimum wage is at $15, the demand at that wage is at 50 and supply is at 100. causing the unemployment of 50.

A higher wage will also shift the supply curve of other market to the left, it will decrease the quantity and increase the price in the market for other goods.

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