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Eco doubt from CFAI text pg 76
Inefficiency of minimum wage.
I understand that when minimum wage is imposed it results in inefficiency due to the deadweight loss created. My doubt is isn’t this deadweight loss created due to excess supply of labour ie, overproduction. looking at the graph on pg 76the minimum wage is imposed at a wage rate of 5. At this wage rage the qty supplied would be 22 hours whereas the efficient qty is 21 hrs. This means the deadweight loss is due to over production. So shouldn’t the dead weight loss appear on the right side of the equilibrium point in the graph ( as it appears for over production) than on the left side?
Can someone help me clear my doubt?
Thanks |
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