Answer
a) The market wage is $W_{1}$, the number of people employed is $Q_{D}$, and the number of people unemployed is $Q_{S}-Q_{D}$. The total wage payments to unskilled workers is the green rectangle.
b) Employment would decrease, and the change would depend on the elasticity of demand.
c) Unemployment would increase, and the change would depend on both the elasticity of demand and the elasticity of supply.
d) Inelastic demand would increase total wage payments, and elastic demand would decrease total wage payments.
Work Step by Step
a) Please see the graph. The market wage is the minimum wage, $W_{1}$ (the orange horizontal line). The number of people employed at $W_{1}$ is the intersection of the minimum wage and the demand curve (denoted $Q_{D}$). The number of people unemployed at the minimum wage is the difference between the number of people supplied at the minimum wage and the number of people demanded at the minimum wage ($Q_{S}-Q_{D}$). The total wage payments made to unskilled workers is equal to the minimum wage multiplied by the number of workers demanded (the green rectangle).
b) Since the minimum wage would increase, the equilibrium quantity demanded would be less, and the number of unemployed workers would increase. Since there is a current surplus of labor, the elasticity of supply would not change.
c) The number of people employed (the quantity of labor demanded) would depend on the elasticity of demand, and the number of people willing to work (the quantity of labor supplied) would depend on the elasticity of supply. The difference between the quantity of labor supplied and the quantity of labor demanded determines the level of unemployment.
d) With inelastic demand, a few additional workers would be made unemployed, so the total wage payments would increase. (The percentage increase in the minimum wage is greater than the percentage decrease in the number of people employed.)
With elastic demand, even fewer workers would be employed. (Many more workers would be made unemployed.) Additionally, the percentage decrease in the number of people employed would outweigh the percentage increase in the minimum wage.
