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In a standard supply-demand model of the labor market, a binding minimum wage generates increased unemployment, although empirical studies show mixed results on the matter.
In a standard supply-demand model of the labor market, a binding minimum wage generates increased unemployment, although empirical studies show mixed results on the matter. Identify the key assumptions of this model which produce the unemployment-generating result, and suggest possible reasons why this theoretical relationship may not hold (i.e. when a binding minimum wage doesn't increase unemployment or only does so partially). Which scenario do you feel is more realistic and why? Why might this not be the case
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