Increased Labor Costs: The most direct effect is an increase in labor costs. If a business was previously paying its employees $10 per hour, a 20% increase would raise that to $12 per hour. For a small business with 10 employees each working 40 hours a week, that's an extra $800 per week, or $41,600 per year. Potential Job Loss: To offset these increased costs, businesses might reduce their workforce, leading to job loss. This could be particularly harmful in a rural community where job opportunities may already be limited. Price Inflation: Alternatively, businesses might pass the increased costs onto consumers by raising prices. This could lead to inflation, reducing the purchasing power of all consumers in the community, not just those earning minimum wage. Reduced Profit Margins: If businesses cannot or choose not to reduce their workforce or raise prices, they might have to accept reduced profit margins. This could make it harder for them to invest in growth or weather financial difficulties. Potential Benefits: On the positive side, higher wages could lead to increased consumer spending, benefiting local businesses. They could also reduce employee turnover, lowering hiring and training costs. As for how this relates to your class, it depends on the specific unit you're studying. If it's an economics class, this scenario could be used to discuss concepts like labor costs, inflation, and supply and demand. If it's a business class, it could be used to explore business