Micro 6.7

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What is the first definition of the national minimum wage (NMW)?
The statutory minimum wage used to increase the earnings of the low-paid.
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What is the second definition of the NMW?
It is a wage which legally obliges employers to pay their workers at least a certain hourly rate.
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What will the impact of the introduction or raising of the NMW depend on?
The elasticities of demand and supply for labour
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How can the NMW lead to unemployment?
A minimum wage introduced above the free market wage which would lead to an excess supply of labour.
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How can unemployment caused by excess supply be solved?
By increasing the incomes of the low-paid, who tend to have a high marginal propensity to consume, extra demand is created in the product market, which increases workers’ MRP and the demand for labour increases.
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Other cards in this set

Card 2

Front

What is the second definition of the NMW?

Back

It is a wage which legally obliges employers to pay their workers at least a certain hourly rate.

Card 3

Front

What will the impact of the introduction or raising of the NMW depend on?

Back

Preview of the front of card 3

Card 4

Front

How can the NMW lead to unemployment?

Back

Preview of the front of card 4

Card 5

Front

How can unemployment caused by excess supply be solved?

Back

Preview of the front of card 5

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