The equilibrium wage (W0) would lead to full employment (L0) as supply and demand of labour are in balance. According to this theory, a binding or statutory minimum wage (W1) higher than the equilibrium wage increases the price for labour by artificially introducing a wage floor. The supply of labour (L1) would be larger than employer demand (L2). This would result in unemployment, since fewer workers are needed or employed.
Curve chart: relation between wages and
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