Homework Answers
Question 1
(a)
The equilibrium wage rate in the market is $12 per hour because corresponding to this wage rate the quantity demanded of yoga instructors is equal to the quantity supplied of the yoga instructors.
The minimum wage can only be strictly enforced if its is greater than the equilibrium wage rate.
The wage rate of $13 per hour is greater than the equilibrium wage rate of $12 per hour.
So, minimum wage of $13 per hour will be strictly enforced.
At $13 per hour, the quantity demanded of yoga instructors is 300 and the quantity supplied of yoga instructors is 450.
When, at a wage rate, the quantity demanded of labor is not equal to the quantity supplied of labor then lower of the two is the quantity employed.
So,
The quantity of yoga instructors employed is 300 yoga instructors.
Unemployed = Quantity supplied - Quantity demanded = 450 - 300 = 150
Thus,
300 yoga instructors are employed and 150 yoga instructors are unemployed.
(b)
The equilibrium wage rate in the market is $12 per hour because corresponding to this wage rate the quantity demanded of yoga instructors is equal to the quantity supplied of the yoga instructors.
The minimum wage can only be strictly enforced if its is greater than the equilibrium wage rate.
The wage rate of $10 per hour is lower than the equilibrium wage rate of $12 per hour.
So, minimum wage of $10 per hour will not be strictly enforced.
Thus, equilibrium wage rate will prevail in the market for yoga instructors.
At wage rate of $12 per hour, 400 yoga instructors are demanded and 400 yoga instructors are supplied.
Hence,
400 yoga instructors are employed and 0 yoga instructors are unemployed.
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