A case study in this chapter discusses the federal minimum-wage law. Suppose the minimum wage is $7 per hour in the market for unskilled labor, as shown on the following graph. Use the grey point (star symbol) to indicate the market equilibrium wage and quantity of labor in the absence of a minimum wage. Then use the purple point (diamond symbol) to indicate the level of employment at the minimum wage provided, and use the orange point (square symbol) to indicate the quantity of labor supplied at this minimum wage. Finally, use the green polygon (triangle symbols) to show the total wage payments to unskilled workers. Market EquilibriumMinimum Wage OutcomeLabor Supplied at Minimum WageTotal Wage Payments012345678910109876543210Wage (Dollars per hour)Quantity of Labor （Millions of workers)DemandSupplyMinimum Wage At the minimum wage of $7 per hour, the level of unemployment is million workers, and the total wage payments to workers are million. Now suppose the secretary of labor proposes an increase in the minimum wage. Indicate the effect this change in the minimum wage has on each of the following labor market components. Increase Decrease Employment Unemployment Complete the following table by indicating whether the elasticity of demand, the elasticity of supply, both, or neither affect the magnitude of the change in employment and unemployment. Elasticity of Demand Elasticity of Supply Employment Unemployment If the demand for unskilled labor were inelastic, the proposed increase in the minimum wage would the total wage payments to unskilled workers.

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter4: Demand And Supply: Applications And Extensions

Section: Chapter Questions

Problem 6CQ

See similar textbooks

Related questions

Question

A case study in this chapter discusses the federal minimum-wage law.

Suppose the minimum wage is $7 per hour in the market for unskilled labor, as shown on the following graph.

Use the grey point (star symbol) to indicate the market equilibrium wage and quantity of labor in the absence of a minimum wage. Then use the purple point (diamond symbol) to indicate the level of employment at the minimum wage provided, and use the orange point (square symbol) to indicate the quantity of labor supplied at this minimum wage. Finally, use the green polygon (triangle symbols) to show the total wage payments to unskilled workers.

Market EquilibriumMinimum Wage OutcomeLabor Supplied at Minimum WageTotal Wage Payments012345678910109876543210Wage (Dollars per hour)Quantity of Labor （Millions of workers)DemandSupplyMinimum Wage

At the minimum wage of $7 per hour, the level of unemployment is

million workers, and the total wage payments to workers are

million.

Now suppose the secretary of labor proposes an increase in the minimum wage.

Indicate the effect this change in the minimum wage has on each of the following labor market components.

	Increase	Decrease
Employment
Unemployment

Complete the following table by indicating whether the elasticity of demand, the elasticity of supply, both, or neither affect the magnitude of the change in employment and unemployment.

	Elasticity of Demand	Elasticity of Supply
Employment
Unemployment

If the demand for unskilled labor were inelastic, the proposed increase in the minimum wage would the total wage payments to unskilled workers.

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions