A case study in this chapter discusses the federal minimum-wage law. Suppose the minimum wage is $8 per hour in the market for unskilled labor, as shown on the following graph.

Use the grey point (star symbol) to indicate the market equilibrium wage and quantity of labor in the absence of a minimum wage. Then use the purple point (diamond symbol) to indicate the level of employment at the minimum wage provided, and use the orange point (square symbol) to indicate the quantity of labor supplied at this minimum wage. Finally, use the green polygon (triangle symbols) to show the total wage payments to unskilled workers.

Wage (Dollars per hour) 10 2 3 4 5 6 Y 8 Quantity of Labor (Millions of workers) Supply Minimum Wage Demand at Market Equilibrium 0 Minimum Wage Outcome Labor Supplied at Minimum Wage Total Wage Payments \fElasticity of Demand Elasticity of Supply Employment O Unemployment O O