Question

PROBLEM #1 The following represents information on the daily labor market for fast-food workers in a suburban community. Use this data on the demand and supply of labor to answer the questions below. Wage is measured per hour; quantities demanded and supplied are also measured in hours. Wage/Hour $13 12 Quantity Demanded (Hours) 1000 980 960 940 890 840 Quantity Supplied (Hours) 1100 1090 1070 1060 890 810 Determine the equilibrium hourly wage in this market and equilibrium quantity of hours. Suppose the state in which this town is located enacts a new law, requiring a minimum wage of $12 per hour. Determine whether this market will experience a surplus or shortage. Find the magnitude of this surplus or shortage. If the minimum wage had been set at $8/hour instead, would there be a surplus, a shortage, or neither? Briefly explain your answer.

Answer 1

Llat suhbatum point guantity demanded of labur.and guantity Supplies I supplied is equal of Hence, at wage rate of da/ hour ago grondly demanded and guantity Sapphed is equal to 39. huus Sunggulubowm bonuda Wage is dat hours eguali laium guddy of huury is 390 hour_ 6 Minum wage is an example of Price flwr. A price flwr is effective when it is set above equilitonin price therefore minimum wage is effective when it is set above eguilibrium wage a effective minimum wage cause a surplus in the marked A minimum wage of 12 per hour worlds be effective minimum wage because it is above the equilibrium wage of 8 9 hour. att minimum wage of die har, gronkity supplied - 1090 har und quantity demonde- 930 hours Surples - aty supplied - gay demanded Surplus = logu - 980 7 Surplus = 110 hours Minimum wage of $12 buurs cause a surplus of 110 hours 6 If mannen wage set below the equilibrium wage, then there would be neither shostage not toplus In this case, market forces brings the equilibrium Heng minimum wage of 18 hou would neither create shortage nur surplure. There will be equilibrium,