If the minimum wage is set above the equilibrium wage, what do we expect to happen?

A. Wages and unemployment will fall.

B. Wages will rise and unemployment will fall.

C. Wages will fall and unemployment will rise.

D. Wages and unemployment will rise.

E. There will be no effect.

• The answer is D; Wages and unemployment will rise.

The minimum wage has the same behavior as the price floor on labor. Here, the minimum amount of salaries are set, and employers have to pay their workers an amount that is not less than the set price. A minimum price set above the equilibrium wage will have the wage levels increase, and more workers will be willing to work for the increased wage. In this situation, more labor is willing to get provided than what the employers demand; therefore, a surplus in labor arises. The high number of workers numbers who have no jobs causes the unemployment rates to increase. Economic models indicate the same on the other commodities, in that the artificial increase of commodity prices will have the demand of the commodities decrease while their supply increase.