<p>First of all, think about the definition of unemployment as it is used in this example. An unemployed person is someone that <em>wants</em> to work, but who cannot, because he can't find a job - as labor supply is not high enough. The crucial point is that people may want to work in some situations, but in others they may not.</p>

<p>With this in mind, the reason that the equation you postulate is incorrect, is due to the fact that the labor supply in your example is <em>elastic</em>. That means, the higher the wage, the higher is the labor supply. You can see this in the upward shape of the labor supply function. To answer your question: The unemployment quantity under minimum wage becomes larger than the market employment, because after the wage increases more people want to work, and hence the quantity of </p>

<blockquote>
  <p>employed people + unemployed  people</p>
</blockquote>

<p>increases - as compared to the market equilibrium before where the wage was lower.</p>

<p>It is also interesting to think about a case in which your initial thought would be correct. This would be the case if labor supply was completely <em>inelastic</em>. This situation is reached as the labor supply curve rotates to the left (staying in the initial market equilibrium) until the labor supply curve is a vertical line. In this situation your equation </p>

<blockquote>
  <p>quantity demanded at minimum wage + unemployment = market employment</p>
</blockquote>

<p>holds. This is how it would look like:</p>

<p><a href="https://i.sstatic.net/2vw30.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/2vw30.jpg" alt="enter image description here"></a> </p>

CC BY-SA 3.0
2017-09-22T19:14:07.970Z
2017-09-22T19:29:32.677Z
2017-09-22T19:29:32.677Z
Tartan Leaves
<p>Why unemployment quantity can be larger than the market employment based on this price ceiling supply/demand chart?</p>

<p>Also, Isn't that (quantity demanded at minimum wage + unemployment = market employment)?
<a href="https://i.sstatic.net/f5OLZ.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/f5OLZ.jpg" alt="enter image description here"></a></p>

<microeconomics>
Why unemployment quantity can be larger than the market employment based on this price ceiling supply/demand chart?
Victor
# Why unemployment quantity can be larger than the market employment based on this price ceiling supply/demand chart?

(Asked by: username_0 on 2017-09-22)

Why unemployment quantity can be larger than the market employment based on this price ceiling supply/demand chart?

Also, Isn't that (quantity demanded at minimum wage + unemployment = market employment)?
[![enter image description here](https://i.sstatic.net/f5OLZ.jpg)](https://i.sstatic.net/f5OLZ.jpg)

**Tags:** microeconomics

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## 1 answers

### Answer by username_1 on 2017-09-22. Score: 1 | Accepted answer

First of all, think about the definition of unemployment as it is used in this example. An unemployed person is someone that *wants* to work, but who cannot, because he can't find a job - as labor supply is not high enough. The crucial point is that people may want to work in some situations, but in others they may not.

With this in mind, the reason that the equation you postulate is incorrect, is due to the fact that the labor supply in your example is *elastic*. That means, the higher the wage, the higher is the labor supply. You can see this in the upward shape of the labor supply function. To answer your question: The unemployment quantity under minimum wage becomes larger than the market employment, because after the wage increases more people want to work, and hence the quantity of

> employed people + unemployed people

increases - as compared to the market equilibrium before where the wage was lower.

It is also interesting to think about a case in which your initial thought would be correct. This would be the case if labor supply was completely *inelastic*. This situation is reached as the labor supply curve rotates to the left (staying in the initial market equilibrium) until the labor supply curve is a vertical line. In this situation your equation

> quantity demanded at minimum wage + unemployment = market employment

holds. This is how it would look like:

[![enter image description here](https://i.sstatic.net/2vw30.jpg)](https://i.sstatic.net/2vw30.jpg)


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