Minimum wage - Unit 1

Question 1

(5) Why may regional wage differences occur?

Answer 1

• cost of living
• population
• quality of life
• local industry
• local skills

Question 2

On the graph for a rise in the minimum wage what happens to Q?

Answer 2

• Q1 (quantity demanded at the wage rate) falls.

- Q2 (Quantity willing to work at the wage rate) rises

Question 3

(4) Advantages to the minimum wage:

Answer 3

• Higher tax revenue for the government
• Income is more fairly distributed
• People attracted off of benefits
• poverty is reduced

Question 4

(3) Disadvantages of the minimum wage:

Answer 4

• Firm costs rise leading to people being made reduction, thus unemployment rises
• Higher prices could cause inflation which means internationally less competitive exports
• Younger workers lose out

Question 5

(3) Effects of a higher minimum wage depends on:

Answer 5

• state of economy at the time
• how high it it raised compared to original equilibrium
• elasticity of demand for labour
  (if inelastic then very little unemployment is created)