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Chapter 28: Q. 1- For Critical Thinking (page 643)

Would a higher minimum wage rate cause a shift of a firm's labor demand curve or a movement along that curve? Explain.

Short Answer

Expert verified

A small raise would increase employee productivity while decreasing employee turnover. A shift in the equilibrium quantity of the employment product; a transition in the production line. Companies will also want to employ fewer people if indeed the wage rates go up.

Step by step solution

01

Introduction.

Raising the minimum wage would also enhance customer expenditure, benefit company bottom lines, and aid economic growth. A small raise would boost worker productivity while decreasing employee turnover rate. It will also promote economic growth as a whole by boosting customer market pressure.

02

A manufacturing or service equilibrium price.

A change in quantity demanded of the product that labour produces; a change in the manufacturing process that uses more or fewer workers; and a shift in state policies that affect the number of employees firms want to hire at a specific rate.

03

Explanation. 

Employers will also want to hire fewer people if the wage rate rises. The quantity of labour demanded will decrease, and the demand curve will shift upward.

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