Question

9. "Electric cars have been a flop. Why? First, they are expensive. Second, all cars have been getting greener. To boost the market of electric cars, the federal credit (subsidy) for electric cars changed from $7,500 to $10,000. Given these two events, what is the final effect on the market of hybrid cars? 10. In the U.S., the minimum federal wage was raised to $7.25 per hour in 2009. There was a proposal to increase it to $9 per hour in 2015. In some states, such as California, the minimum wage is already above $9. What would be the impact on the US labor force market? What would be the impact on the California labor force market?

Answer 1

9) In the above scenario the government is providing subsidy to the consumer to increase the demand for the car as they are environmental friendly cars. So as government provide subsidies to people who bought this car the demand increase for these electric car and the demand curve shifts to right keeping the supply constant. As consumer will be paying less they will be willing to buy the car due to which production increase thus making the quantity of cars sold also increase. Thus government is trying to create demand for electric cars by giving subsidies.

10) Due to increase in wage rate from 7.25$ per hour to 9$ per hour there will be more peoope willing to work in the market thus increasing the supply of labour force in US market. There would be no impact on California labour as these people are already getting the wage rate more than 9$ per hour, so they may expect that their wage rate also goes up which may or may not happen.