Economics – The allocation of resources - Supply | e-Consult

Answer:

The imposition of a minimum wage of £12 per hour will lead to an increase in the quantity of labour supplied. This is because the minimum wage increases the profitability of labour for employers. At a higher wage, more workers will be willing and able to offer their services.

Graphically, the minimum wage will shift the supply curve for labour to the right. At the original equilibrium wage of £10, the quantity of labour supplied would have been at a certain level. With the minimum wage of £12, the supply curve shifts right, resulting in a higher quantity of labour supplied at any given wage. This is because more individuals will be incentivised to enter the labour market or to work longer hours.

The extent of the increase in quantity supplied will depend on the elasticity of the labour supply curve. If the labour supply is relatively elastic, a small increase in the wage will lead to a significant increase in the quantity of labour supplied. If the labour supply is relatively inelastic, the increase in quantity supplied will be smaller.