Use the graph below to illustrate and explain what would happen in the labor market if a minimum wage was established at a level above the equilibrium wage

What will be an ideal response?

The labor supply curve would go from Wm rightward to the old supply curve. The level of employment would be determined at the intersection of the demand curve and the new labor supply curve. Before B workers were employed. With the minimum wage A workers will be employed, thus C ? A workers will lose their jobs. The A workers who keep their jobs will earn the higher wage, Wm rather than the previous equilibrium wage.