Question 1 (20 marks)

Indicate what the likely effect would be on the unemployment situation in South Africa if the minimum wage rate is set above the equilibrium wage rates

• Discuss how the market will react to the introduction of a statutory minimum wage
• Explain the impact of a minimum wage rate below the equilibrium with the aid of a diagram and also with reference to the extract given
• Indicate on they diagram the minimum wage and the resultant effect
• Explain the deadweight loss