What's the demand function? What's the demand curve? What's the supply function?

What's the
supply curve? What's the notion of market equilibrium that we have? How do we justify that notion
of market equilibrium? Then, let's look at the demand and supply curves individually. What does the
demand curve look like? Why does it look like that? What is our price elasticity? What is the price
responsiveness of demand? Or supply curves? Why do they look like that? What is price elasticity or
price responsiveness of supply?

MINIMUM WAGE IMPLEMENTATION AS A SHOCK

Think about implementing a minimum wage in an economy. So what you're saying is the wage rate
cannot be less than 20 rupees per hour, even though now it's 12 rupees per hour. The first thing that
will happen because of that minimum wage is some people will lose their jobs because some firms
will say, I'm not willing to hire at 20 rupees per hour. Now if that bad impact propagates and is not
reversed, then my original decision to impose a minimum wage could turn out to be a bad idea
because a lot of people simply have lost their jobs. And if they've lost their jobs in Sector X, then few
months later, they have lost their jobs in Sector Y. And this just gets magnified across a whole bunch
of sectors. That's one possibility.

But that's not the only thing that might happen. My increasing my minimum wages might initially
cause some people to lose their jobs. But the people who are employed have greater purchasing
power, that greater purchasing power will increase their demand. That demand will force firms to
realize it's worth hiring people at 20 bucks per hour. Because now I'm having more demand. The
original negative shock is dampened to the extent that the economy actually prospers because of
that imposition of a minimum wage. If you look at minimum wage experiments in various states in
the United States, there are examples where the imposition of a minimum wage actually lead to a
better economic outcome down the road in terms of more people getting employed and production
increasing over time.