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Draw a labour market diagram, and explain why one of the curves is upward sloping and one downward sloping. Assume that for some reason the

  1. Draw a labour market diagram, and explain why one of the curves is upward sloping and one downward sloping.
  2. Assume that for some reason the wage in the market is below the equilibrium level. Carefully describe the mechanism through which the wage will gradually increase to the equilibrium level.
  3. Suppose the government introduces a minimum wage that is above the equilibrium level. Show it in a diagram and explain the effect on unemployment. Can you think of some (subsequent) effects that are not captured in the diagram?
  4. If you were the policy maker, would you implement a minimum wage? Carefully discuss your own views and reasoning.

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