Question

answer b and c

increased from $7.25 t s0.00 per hour Thdere were slighty over 1 of he largest enm on) ann $7.25 and s9.00). Two of the largest ho would be directly affected by this increas ployers of affected workers are restaurants (2.5 President Obama used propose were slightly over 12 million workers w used to propose that the federal minimum wage be iven ould argue that the demand for restaurant food is more elas e percentage of workers who lose jobs would be greater at yyour answer with an explanation of why the scale and/or 1ose jobs wo iven thi restaurants or grocery stores this fact, would y sfact, would you expect that the wo substitution effect of the minimum wage increase would differ in the two industries. c. Many cooks servers in restaurants currently earn above the minimum wage w hereas most dishwashers and decrease employment of cooks? Explain. are paid the minimum. Would the increase in the minimum wage be likely to increase or

Answer 1

Solution B

Since demand is elastic for restaurants this will lead to more demand for changes in price at restaurants . This will cause hike in minimum wages as productivity and work will be higher for workers. Now as per minimum wage substitution effect, the rise in wages is offset by higher unemployment so to maximise efficiency and hence unemployment will be more in restaurant sector. The demand for grocery food being inelastic doesn't drive change in employment opportunities.

Solution C

Since wages for cooks rise thr employer will offset thr hike of minimum wages by layoffs for certain non performing cooks to compensste for the rise in cost. Hence employment of cooks will decrease .