Final answer:
Increasing the minimum wage could affect the supply of bicycles by causing employers to possibly automate more processes or reduce hiring due to increased labor costs, especially if the new wage is above the market equilibrium.
Step-by-step explanation:
When the federal government increases the minimum wage by $1.00 per hour, this can affect the supply of bicycles in several ways, depending on other market conditions.
If the current wage is at the equilibrium wage, employers are already paying what the market will bear to attract enough workers. Hence, an increase in minimum wage in this situation might not affect the supply of bicycles as the wages paid are already above the minimum.
However, if the minimum wage increase causes wages to rise above equilibrium, it could lead to an excess supply of labor, as more workers may be willing to work at the higher wage, but employers may not be able to afford to hire as many workers or may seek to automate more of the production process to manage costs.
This could result in a reduction in the quantity of bicycles supplied if the plant cannot afford to hire as many workers or must spend additional resources on automation.
Arguments exist both for and against increasing the minimum wage. Proponents suggest that it increases workers' buying power and may stimulate the economy, while opponents argue it might lead to higher unemployment and increased prices due to higher production costs.