Question

Refer to the foilowing diagram for Questions 27 and 28 The City Council of Tuscaloosa, AL has proposed raising the minimum wage in their city up to $14.00 per hour up from the current level of $10.00. They are not sure what to do because they want people to make more money but they also want as many people as possible to have jobs. They are asking you to analyze the situation using the chart below and tell them what you think will happen if they go through with it and actually raise it to $14.00 per hour. 16.00 Bapply 14.00- 0.00 Demand qoantity 2,60 67,000 In the absence of the City imposed minimum wage increase (or put another way where we are now if the proposal is not approved) what is the number of workers that will be hired in the City and the hourly rate that will be paid? 27,000 workers at $8.00 per hour 27) A) 27,000 workers at $14.00 per hour B) 41,000 workers at $10.00 per hour C) 67,000 workers at $14.00 per hour D) If the minimum wage is raised to $14.00 per hour, what will be your conclusion that you report to the City Council: 28) 27,000 people will have jobs which is fewer than if the minimum wage was A) unchanged at $10.00 41,000 people will have jobs and there will be no change in employment levels as B) a result of the change in minimum wage. 67,000 people will now have jobs which is an increase as a result of the change in C) minimum wage More than 67,000 people will now have jobs as a result of the change in minimum D) wage

Answer 1

a) In an absence of minimum wages in the market the market will settle at the equilibrium that is at the wage of $10 and the quantity of 41,000. The answer is "C".

b) "A"

At a higher minimum wage less people will be employed and that is only 27,000, the answer is "A".