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.

Survey Of Economics
10th Edition
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter4: Markets In Action
Section: Chapter Questions
Problem 12SQ
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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.
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