Question

macroeconomics

3. Technology and minimum wages

Tool tip: Use your mouse to drag the green line on the graph. The values in the boxes on the right side of the calculator will change accordingly. You can also directly change the values in the boxes with the white background by clicking in the box and typing. When you click the Calculate button, the graph and any related values will change accordingly. WAGE (Dollars per hourl 15 MARKET FOR LOW-SKILLED LABOR IN FLORIDA Wage Dollars per hourl Quantity Demanded Thousands of workers) 320 Quantity Supplied 500 [Thousands of workers Surplus Thousands of workers) 180 200 400 600 80 1000 QUANTITY IThousands of workers) In the absence of government intervention, the equilibrium wage is $7.50 ,and Florida firms employ 400,000 workers Now, suppose the Florida legislature mandates a minimum wage of $9.00 per hour. 320,000 If legally obligated to pay workers a minimum of $9.00 per hour, Florida firms will hire workens. An unemployed worker is one who would like to work at the prevailing wage but cannot find a job. In market, surplus labor represents unemployment. the labor At a minimum wage of $9.00 per hour, how many low-skilled workers are unemployed? O 180,000 O 500,000 O 400,000 O 320,000

are the answers correct

Answer 1

In the absense of government intervention, equilibrium wage rate is $7.50 at 400,000 workers because it is the intersection of the demand and supply curve. So prices are deternined by the free forces of demand and supply.

If firms mandate price at $9 then firms would hire 320, 000 because as seen from the graph the intersection of the price line and the demand curve showing quantity of labour demanded between 200 and 400 so it is 320,000.

As seen from the graph that at price $9 there is excess supply meaning that demand is 320,000 while supply is 500,000 so the difference between the two that is (500-320=180) $180,000 is low skilled worders unemployees as demand is less than supply.