In n recent speech, the governor of your state announced: \"One of the biggest c

Question

In n recent speech, the governor of your state announced: "One of the biggest causes, or juvenile delinquency in this state is the high rate of unemployment among 16 to 19 year olds. The low wages offered by employers in the state have given fewer teenagers the incentive to find summer employment Instead of working all summer, the way we used to today's teenagers slack off and cause trouble. To address this problem, I propose to raise the state's minimum wage by $1 50 per hour. This will give teens the proper incentive to go out and find meaningful employment when they are not in school" Highlight a possible flaw in the governor's reasoning: SmallCircle A higher minimum wage will serve as a higher price ceiling, reducing the quantity of labor supplied by teenagers. SmallCircle A higher minimum wage will serve as a higher price floor, reducing the quantity of labor by firms. SmallCircle Teenagers likely wiII not increase quantity of labor supplied when the minimum wage increases by $1 50. SmallCircle A higher minimum wage will serve as a higher price ceiling, reducing quantity demand for labor by firms.

Explanation / Answer

A higher minimum wage will serve as a higher price floor, reducing quantity demand for labor by firms. A higher minimum wage will lead to higher supply but lower demand for labor by firms. The labor thus demanded will be less and unemployment will go up.

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