Jul 1, 2016

How Increasing The Minimum Wage Will Boost The Economy - Many People Think "Demand & Supply" Is Of Only One Type But There Are Actually Many Types Of Demand & Supply.


Types of Demand Illustrated
(screenshots from here)


First there is Elastic Demand, i.e. where demand decreases with an increase in price and increases with a decrease in price. This is the only demand curve right wing "economists" seem to be aware of. This type of demand can be analyzed thusly;

This sort of demand usually exists for brand knocks offs that sell at cheaper prices such as equate or great value products. If Wallmart increases price they competitor brand which they are copying will begin to look better. So wall mart has an electric demand (like the image below) where they can increase price by a little but if they did by alot their demand would fall to 0 as consumers switch back to the original brand name products. However, at their cheap price Wall mart can sell a ton of stuff as demand is very high.



On the opposite side there is INELASTIC demand, i.e. when they demand stays pretty much the same no matter how much you increase the price (though rationing may occur). These types of products would be cigarettes, water, electricity and other such essentials (or habit based products).



So, for certain products the demand will basically remained unchanged.

The commonly known demand curve is this one;


Supply curves exist the same way, a quick summary;

Types of Supply Illustrated
(screenshots from Investopedia)


An increase in price will cause a supplier to supply more of a product, at least over time if production capacity is maxed out (i.e. they would be time involved in getting more machinery or opening more offices to increase supply);



Then there is a supply type that does NOT respond to an increase in price. Labor falls into this category. A large increase or decrease in price would not change labor supply 




In addition to this the demand for jobs will ALSO be relatively inelastic as people need to support their families (very few people can actually leave the workforce JUST because the wages or low. Also an increase in wages by a small amount in another region doesn't make labor pick up and move i.e. they tend to stay in their geographic region further illustrating how inelastic supply of labor reall is).

OK. So now we know that, proving we don't make it easy to send jobs abroad, there is an inelastic supply of labor with a relatively inelastic demand for jobs (as they need to survive). So although blue collar workers aren't technically slaves (lack of choice in jobs with lack of availability o leave is what the low wages of nothing profitable for companies of that time) they have very limited choice in what they can do about work no matter what the minimum going rate for labor is.


Now we look at the other piece of evidence, i.e. something called the multiplier effect;

Good Examples From Wikipedia:

For example: a company spends $1 million to build a factory. The money does not disappear, but rather becomes wages to builders, revenue to suppliers etc. The builders will have higher disposable income as a result, so consumption, hence aggregate demand (there will be MORE demand to BUY stuff thus increasing sales, taxes from sales, and the ability to open more businesses) will rise as well. Suppose further all of the recipients of new factory spending in turn spend it.

The increase in the gross domestic product is the sum of the increases in net income of everyone affected. If the builder receives $1 million and pays out $800,000 to sub contractors, he has a net income of $200,000 and a corresponding increase in disposable income (the amount remaining after taxes).



Investopedia: For example, if Mr. Gates deposits $100 into a bank, the bank must by law hold part of that in reserve, but can lend the rest of it back out. If it it must hold 20% in reserve, it can lend out 80%, or $80.
That $80 may be spent several times, but eventually, someone puts it in another bank. This bank keeps 20%, or $16, and lends out $64. This cycle repeats several times. After all the depositing and lending, Mr. Gates’ $100 could become several hundred dollars in deposits.


Read more: Multiplier Effect - Video | Investopedia http://www.investopedia.com/video/play/multiplier-effect/#ixzz4D17S7XF4
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Definition: Every time there is an injection of new demand into the circular flow there is likely to be a multiplier effect. This is because an injection of extra income leads to more spending, which creates more income, and so on. The multiplier effect refers to the increase in final income arising from any new injection of spending.

Increasing minimum wage PARTICULARLY help women voters;



We know from EVIDENCE (a very important thing in any science especially a social science like Economics) AND THEORY that an increase in minimum wage boosts an economy because of the multiplier effect, thus creating more sales of consumer goods and making more businesses and thus jobs possible.

A collection of pieces of evidence showing increasing minimum wage helps the economy;



The problem we have appears to be one of Class Warfare. Mostly, its the GOP/Fox that are committed to this type of warfare to a ridiculous extreme;




Related posts:

Economic Treason Proofs




This is a copy and paste of an old post on this topic which seems to round off my argument pretty well;

The Arguments Against The Minimum Wage Debunked Using The Daily Show


In depth "study";

Basic Economics & Civics Highlighted



Fox Business ... Exposed?



Related theme:

I SMASH Corporate Media!!!



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