## Summary: Minimum Wage Legislation & Labor Market This worksheet shows a **labor market graph** for the fast-food industry in Supersize City, illustrating the effects of minimum wage laws. ### Key Points: - **Equilibrium**: The equilibrium wage and labor quantity are determined by the intersection of the supply and demand curves. - **Minimum Wage Law**: If a law sets a minimum wage above the equilibrium wage (e.g., $8/hour), it is called a **price floor**. - At $8/hour, more workers want jobs (labor supplied) than there are jobs available (labor demanded), **causing unemployment**. - For example, at $8/hour, labor demanded = 486,000 workers, but labor supplied = 360,000 workers. - **Pressure on Wages**: When minimum wage is above equilibrium, there is **downward pressure** since there is a surplus of labor (more people want jobs than there are jobs available). - **Binding Minimum Wage**: A minimum wage is **binding** only if it is set above the equilibrium wage; otherwise, it has no effect. ### Graph Interpretation: - **Supply curve**: Upward sloping (more people want to work at higher wages). - **Demand curve**: Downward sloping (employers want to hire fewer workers at higher wages). - **Minimum wage line**: Horizontal line above equilibrium wage shows the new legal minimum. ### Conclusion: Setting a minimum wage above the equilibrium wage creates a surplus of labor (unemployment) and is considered a binding price floor. If set below equilibrium, it has no effect on the market.