Suppose the only inputs to production of ice cream cones are ice cream and minimum wage...
Suppose the only inputs to production of ice cream cones are ice cream and minimum wage labor. If the minimum wage increases, how would we expect this to impact the market for ice cream cones?
Supply curve shifts left; equilibrium P increases and Q decrease.
Supply curve shifts right; equilibrium P and Q increase
Supply curve shifts right; equilibrium P and Q decrease
Supply curve shifts left; equilibrium P and Q decrease
Homework Answers
The increase in the minimum adds to the increase in the cost of the production. When the costs of production increase firms usually cut the production so here the supply decreases and the supply curve would shift to the left. As a result the equilibrium price will increase and the quantity will decrease.
Ans: Supply curve shifts left; equilibrium P increases and Q decrease.
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