Question

Choose the point on the graph that shows an excess supply of labor at minimum wage.

Answer 1

The excess supply of labor at minimum wage is the difference between the labor that is demanded at minimum wage which would be 18 and the labor supply at minimum wage which is 45. So 45-18=27, 27 is the excess supply of labor there is at minimum wage.

Answer 2

The correct answer is the following: "the excess supply of labor due to minimum wage is represented at price level= $18 (min wage), where the amount of workers supplied (45) exceeds the amount demanded (18) in 27 employees".

A minimum wage is a price restriction established by the economic authorities. It does not allow the price in the labor market to fluctuate under a certain limit. When the minimum wage is located above the equilibrium price, it generates an excess supply situation, therefore, there is more people willing to work than employers willing to hire them. The difference is of 27 individuals that will remained unemployed.