Question

4. Minimum wage legislation The following graph shows the labor market in the fast-food industry in the fictional town of Supersize City Use the graph input tool to help you answer the fallowing questions. You will not be graded on any changes you make to this graph Note: Once you entera value in a white field, the graph and any corresponding amounts in each grey ficld w change accordingly. Graph Input Tool Market for Labor in the Fast Food Industry I W per hour) Supply 00 Labor Suppiled workers) 0 180 20 30 450 540 630 T20 81D 900 LABOR (Thousands af workers qulibrium quantity of labor housand workers In this market, the equilibrium haurly wage is Suppose a senator introduces a bill to legislate a minimum haurly wage of $6. This type of price control is caled a For each of the wages fisted in the following tabve, determine the quantity of labor demanded, the quantity of fabor suppied, and the diwrection of pressure exerted on wages in the absence of any price controls wage Dollars per hour) 12 Labor Demanded Labor Supplied ousands of workers) usands of workers) Pressure on Wages True or False: A min mum wage above $10 per hour is a binding minimum wage in this market

Answer 1

Equilibrium hourly wage=$10 and equilibrium hourly quantity=450thousands

At wage rate=12, labor demanded=225thousand and labor supplied=675thousand. There is downward pressure on prices

At wage rate=$8, labor demanded=900 thousand and labor supplied=0thousand. There is excess demand which puts an upward pressure on price

True.

Any price floor above equilibrium price is binding