What would constitute the deadweight loss as the result of a minimum wage rule?

Loss of output due to excess labour suppy

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Loss of income of workers due to decreased wages

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Loss of income of workers due to decreased demand

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Loss of potential output of labour due to decreased demand

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Solution

The correct options are
C Loss of income of workers due to decreased demand
D Loss of potential output of labour due to decreased demand
As a result of minimum wage rule, the producers would demand less labour. The lost output of these labourers would be the loss of producer surplus. Additionally, workers are also losing out on wages because of decreased demand. These two factors would constitute the deadweight loss.

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