Question

The November 13, 2014 issue of the Chicago Tribune has a story titled “Emanuel Puzzled by Rauner on Minimum Wage.” (You do not have to read the article to complete this assignment.) In it, Mayor Emanuel expresses his desire to raise the minimum wage for adults 18 and over from $8.25 to $13.00 per hour. To simplify the analysis, let’s assume that prior to this change in the law, the current labor market for unskilled workers was in equilibrium at $8.25 per hour.

Question 1

Draw a graph depicting the current labor market for unskilled labor, with the quantity of unskilled labor (L) on the horizontal axis and the price of unskilled labor, wages (W), on the vertical axis. Show the demand and supply curves and discuss all equilibrium values.

Upload the image of your graph.

Question 2A

Now analyze the impact of the new minimum wage law assuming it is put in place. Graphically indicate the outcome.

Upload the image of your graph.

Question 2B

Discuss the impact of the new law on employment and wages, and how your graph shows this.

Question 3

As a result of the new law, suppose a newspaper editorial page applauded the change, saying that such help to the lowest earners could not have come at a more opportune time given the sagging economy. Do you agree? Explain.

Question 4A

Now suppose that after the $13.00 minimum wage is enacted, AND we observe no change in equilibrium quantity of L, but we do learn that some workers who want to work at $13.00/hour cannot find a job. Can you show a demand and supply curve analysis that supports this observation?

Draw and upload a graph showing this.

Question 4B

Discuss how your response to Question 4A supports this observation.

Answer 1