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
Asked Nov 9, 2019
25 views

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?

check_circle

Expert Answer

Step 1

The employers legally pay a minimum wage to the workers which is the lowest remuneration that the workers receive. Minimum wage is kind of a price floor below which the workers will not be willing to provide their services.

Minimum wage will surly increase the wage rate as it is generally introduced to help the workers. With the increase in wage, the employers will demand for fewer laborers which will definitely reduce the employment. There will be less people employed and more of unemployment in the market due to minimum wage.

Step 2

The equilibrium wage and the level of employment in the competitive labor market can be found out be equating quantity demanded and quantity supplied of laborers as follows.

help_outline

Image Transcriptionclose

QD 10,000-100W QS 2,000 1,900W QD QS 10,000 100W = 2,000+1,900W 2,000W 8,000 W 4 Q 10,000-100x4 Q9,600

fullscreen
Step 3

Thus, the initial equilibrium Wage and Level of employment...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Economics

Related Economics Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: 10.We discussed four problems (Problems of Timing, Political Consideration, Offsetting State and Loc...

A: The four problems of fiscal policies are listed as below. Problems of TimingPolitical ConsiderationO...

question_answer

Q: 3. The components of marginal revenue Jacques's Fire Engines is the sole seller of fire engines in t...

A: The graph below shows the purple shaded region which shows the loss in revenue due to a reduction in...

question_answer

Q: Show that the two utility functions given below generate identical demand functions for goods X and ...

A: Two utility functions are given which are:

question_answer

Q: GDP is best defined as    a. the cost of producing all final goods and services sold during a give...

A: GDP is best defined as (b) the market value of all final goods and services produced during a given ...

question_answer

Q: As a manager of a chain of movie theaters that are monopolies in their respective markets, you have ...

A: (1)The supply function can be written as Qs=2000+2P. From the supply function inverse supply functio...

question_answer

Q: Indicate which of the functions of money (a medium of exchange, a unit of account, and a store of va...

A: A medium of exchange is an instrument that is used in intermediate or a system that is used to facil...

question_answer

Q: Most hospitals and nursing homes, and some insurance companies, do not aim to maximize profit but ai...

A: To determine the aim of insurance companies and hospitals.

question_answer

Q: 2. Briefly explain why the following would cause the Aggregate Demand curve to shift to the right(an...

A: Aggregate demand   = C + I + G + (X-M), C= consumption, I= Investment, G= Government spending, (X-M)...

question_answer

Q: Economics Question

A: Click to see the answer