Question

Homework (Ch 06) 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 following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool Market for Labor in the Fast Food Industry Supply Wage (Dollars per hour) Labor Demanded (Thousands of workers) 174 Labor Supplied (Thousands of workers) 126 WAGE (Dollars per hour) + Demand 0 + 30 III TIT + 60 90 120 150 180 210 240 270 300 LABOR (Thousands of workers) 0 In this market, the equilibrium hourly wage is $ , and the equilibrium quantity of labor is thousand workers. Suppose a senator introduces a bill to legislate a minimum hourly wage of $6. This type of price control is called a For each of the wages listed in the following table, determine the quantity of labor demanded, the quantity of labor supplied, and the direction of pressure exerted on wages in the absence of any price controls. Wage (Dollars per hour) Labor Demanded (Thousands of workers) Labor Supplied (Thousands of workers) Pressure on Wages

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Answer 1

Equilibrium hourly wage = $ 10 (where Demand = Supply)

Equilibrium quantity of labour = 150 thousand workers

This type of price control is called a price floor (non-binding)

Wage	Ld	Ls	Pressure on wages
12	138	162	downward
8	162	138	upward

The statement is true (a min. wage below $ 10 would be non-binding)