Explanation of Minimum Wage Through Economics

Essay by Chink182High School, 12th gradeA+, April 2005

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This was actually a short answer question from my economics test which asked me to explain in a short paragraph how minimum wage reflects the application of "supply and demand" to the real worl economy of Canada.

This application of supply and demand to the real world economy of Canada is by showing that as the pay rates go up, the supply of citizens willing and able to work for the job or position available will increase while the demand or number of positions available for the job will be limited. The equilibrium price is the wage in which there are just enough people willing to work as there are positions available. As the government imposes minimum wage, the supply and demand of jobs is disturbed. This floor price of minimum wage does not allow pay rates to fall below the set price into equilibriu causing the offset of workers to positions available.

Employers have the same amount of money to spend, however the cost of hiring an employee rises causing people to be laid off on top of the increased amount of people willing to work for the increased minimum pay. This will contribute to the unemployment rate since the supply of available workers increases while the number of jobs decreases. Many more people will be on welfare causing a strain on the employed who must pay for the welfare through their taxes. The government imposes the floor price of minimum wage though, to help Canadians earn a decent living and be able to support themselves. Moreover, if the floor price was not set and the equilibrium price was below the amount of welfar, it would be unfair to the working force since they would be better off not working and reaping the benefits from the government. This...