National minimum wage

• What is the National Minimum Wage an example of?

  A minimum price
• Why must the minimum wage be set above the free market price?

  To ensure it is effective
• What does the diagram suggest about the effect of a minimum wage on employment rate?

  It leads to a fall in employment rate

  
• What does inelastic labour demand imply about the contraction in demand for labour?

  There is only a small contraction in demand
• What has been observed regarding unemployment and the rise in the NMW in the UK?

  No evidence of a rise in unemployment
• Why do some firms believe there has been no rise in unemployment with the NMW?

  Because the NMW is still relatively low
• What are the positive externalities of the National Minimum Wage?

  • Increases standard of living for the poorest
  • Provides incentive for people to work
• How might the NMW affect young people's job prospects?

  It could make it harder for them to find jobs
• What potential impact could a higher wage have on government tax revenue?

  It could increase tax revenue
• What is a potential disadvantage of a higher wage on a global scale?

  It could reduce global competitiveness
• Why might countries with lower wages be a concern for the UK?

  They can compete better in the market