a. Draw the labor market. Indicate graphically and discuss the impact of the minimum wage on the

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Question:

a. Draw the labor market. Indicate graphically and discuss the impact of the minimum wage on the labor market.

b. It has been argued that the negative impacts of a minimum wage increase (higher unemployment) are more than offset by the favorable impact on incomes (wage*labor use). Such an argument rests on the assumption that the elasticity of labor demand in response to a change in wage rates is a. Elastic; b. Inelastic or c. Unitary in Elasticity. Which range of elasticity value would be consistent with such a conclusion. Use an example of your own derivation, to support your answer. Do not just calculate an elasticity. Calculate an elasticity that supports this position! and then show that it is supported by your calculations.

                        W0 =                                        L0 =
                        W1 =                                        L1 =