Question

 1. The language of price controls

 Suppose that, in a competitive market without government regulations, the equilibrium price of gasoline is $3.00 per gallon.

 Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding.

2 Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. 

Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.

 In this market, the equilibrium hourly wage is _______  and the equilibrium quantity of labor is _______  thousand workers.

 Suppose a senator introduces a bill to legislate a minimum hourly wage of $6. This type of price control is called a _______ 

 For each of the wages listed in the following table, determine the quantity of labor demanded, the quantity of labor supplied, and the direction of pressure exerted on wages in the absence of any price controls.

 True or False: A minimum wage below $10 per hour is a binding minimum wage in this market.

•  True

•  False

Answer 1

# In this market ,the equilibrium hourly wage is $ 6 and Equilibrium Quantity of labour is 450 thousand workers

( Reason---- demand for labor equals supply of labor at this wage rate)

Suppose a senator introduces a bill to legislate a minimum hourly wage of $6,this type of price control is called a price floor.

# Determining Quantity of labour demanded , Quantity of labour supplied & direction of pressure exerted in the following table-----

Wages($ per hour)	labour demanded ( 000' )	Labor supplied ( 000')	Pressure on wages
8	675	415	upward
12.	480	225	downward

All values may be approx.

# True / false------

A minimum wages below $10 per hour is a binding minimum wage in this market-------:

false

( The reason is , the price $10 per hour is equilibrium price for labor ad per demand and supply forces.,so it is not binding, if any minimum wage ( price floor) is applied below equilibrium price, but if it is applied above equilibriums, it would be binding.)