Question

The graph on the right shows the demand for and supply of labor in a market with an equilibrium wage rate of $9 per hour. Labor supply Show the impact on the graph if a minimum wage of $11 per hour is enacted. 1.) Using the point drawing tool, plot the point that illustrates the quantity of labor demanded when the minimum wage is set at $11 per hour. Label your point 'A.' 2.) Using the point drawing tool, plot a point that illustrates the quantity of labor supplied when the minimum wage is set at $11 per hour. Label your point 'B.' Wage Carefully follow the instructions above and only draw the required objects. According to the graph, when the minimum wage is set at $11 per hour, there will be - unemployment of _workers in this market. Labor demand O O O O A. frictional; 2 million. B. structural; 2 million. C. structural; 4 million. D. frictional; 4 million. o i į į į Ś & į Quantity of labor (millions) į ģ 10

Answer 1

1. AT minimum wage = $11, then quantity of labor demanded falls to point A which is 3 million units.

2. At minimum wage of $11, the quantity of labor supplied has increased to point B which is 7 million units.

3. Option C. There will be structural unemployment because quantity supplied of labor exceed the quantity demanded of labor by 4 million units = Quantity supplied - Quantity demanded = 7 - 3 = 4 million units.

4. Option B. The losers are mainly low skilled workers who lose their job because of lack of demand of labor.

5. Option A. If minimum wage rate is set at $7 per hour, there would be no structural unemployment due to wage rigidity, since the minimum wage is non-binding at $7 per hour.

6. Increase in unemployment rate/ decline in total surplus

7. only few workers