How do minimum wages affect wages, employment, and unemployment? In a competitive labor market, the demand for workers is given as QD = 10,000 - 100W, and the supply of workers is given as QS =  2,000 + 1,900W, where Q is the quantity of workers employed and W is the hourly wage. What is  the initial equilibrium wage and employment level? Suppose that the government decides that  $5 per hour is the minimum allowable wage in any market. How would this new minimum wage  alter this market? What would the new employment level be? What would happen to total payments to labor? Would there be any excess supply of labor? If so, how much?

Question

How do minimum wages affect wages, employment, and unemployment? In a competitive labor market, the demand for workers is given as QD = 10,000 - 100W, and the supply of workers is given as QS =  2,000 + 1,900W, where Q is the quantity of workers employed and W is the hourly wage. What is  the initial equilibrium wage and employment level? Suppose that the government decides that  $5 per hour is the minimum allowable wage in any market. How would this new minimum wage  alter this market? What would the new employment level be? What would happen to total payments to labor? Would there be any excess supply of labor? If so, how much? 

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