5. Policies to reduce poverty Using several types of public policies, the govern

Question

5. Policies to reduce poverty Using several types of public policies, the government has attempted to alleviate poverty, with varying success. One example is minimum wage laws. An important effect of this type of policy is that it can result in unemployment among the workers who are affected by the minimum wage. The magnitude of the change in unemployment associated with a minimum wage depends on the elasticity of demand forlabor The more the demand for this type of labor, the lower the unemployment caused by the minimum wage.

Explanation / Answer

Answer: higher unemployment ( most workers who rely on minimum wage are more likely to be unskilled workers, and a rise in minimum wage increases the cost of production reducing the demand for labour thus resulting in higher unemployment for unskilled workers. )

unskilled labor

inelastic

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