what would happen if the government imposed a minimum wage as shown in the graph above?\nnothing. it would…

what would happen if the government imposed a minimum wage as shown in the graph above?\nnothing. it would be a non - binding price floor\nit would be a binding price floor, and it would generate a surplus of labor\nnothing. it would be a non - binding price ceiling\nit would be binding, and it would generate a shortage of labor

what would happen if the government imposed a minimum wage as shown in the graph above?\nnothing. it would be a non - binding price floor\nit would be a binding price floor, and it would generate a surplus of labor\nnothing. it would be a non - binding price ceiling\nit would be binding, and it would generate a shortage of labor

Answer

Brief Explanations:

A binding price - floor is set above the equilibrium wage rate. When the government imposes a minimum wage (a price - floor on wages) above the equilibrium wage ($w_1$), the quantity of labor supplied will be greater than the quantity of labor demanded. This creates a surplus of labor. In the graph, the minimum wage is above the equilibrium wage, so it is a binding price floor.

Answer:

It would be a binding price floor, and it would generate a surplus of labor.