Question

The following graph shows the labor market in the fast-food industry in the fictional town of Supersize City Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will chan Graph Input Tool Market for Labor in the Fast Food Industry 20 18 16 14 12t 10 Welers per hour)8 Labor Demanded 600 Labor Supplied workers) (Thousands of workers) 0 80 160 240 320 400 480 560 640 720 800 LABOR (Thousands of workers) thousand workers In this market, the equilibrium hourly wage is S , and the equilibrium quantity of labor ts O Type here to search

Answer 1

1). The equilibrium hourly wage is the labour market clearing wage, I. e. at thee point of intersaction of demand and supply curve of labour market. In above diagram , equilibrium hourly wage is $10, and equilibrium quantity of labour is 400 units.

2). The price policy adopted by legislature by fixing a minimum wage of $8 (below equilibrium wage ) is price floor. It is the wage rate below which workers may not sell their labor.

3). At hourly wage of $14, quantity of labour demanded is zero units ,,while quantity supplied is 480 units. Since supply of labour is more than quantity of labour demanded, it will have downward pressure on wage. As is clear from equilibrium point where wage decreased than $14.

At hourly wage of $6, quantity of labour demanded is 320 units(exactly not clear from graph, but320 or a bit more than 320) ,, while quantity of labour supplied is 800 units

3). False. Reason in part (2). A minimum wage needs to be lower than equilibrium hourly wage.