Question

3. Minimum wage legislation The following graph shows the labor market in the fast-food industry in the fictionasl town of Supersize City Use the graph input tool to heip you answer the following questions. You wiw not be graded on any changes you make to this graph. Wote: Once you enter a velue in a white field, the graph and any corresponding amcunts in sach grey feld will change accortdingly Graph Input Tool Market for Labor in the Fast Food Industry 18. (Dolars per hour) Labor Demanded Thousamds of warkers) 378 Demand c so 180 20 450 540 630 720 810 000 LABOR (Thousands of workers

Answer 1

The equilibrium in the labor market is at $10 wage. The equilibrium quantity of the labor is 450.

The senator will introduce a "price ceiling" at the lower wage i.e. the price cant be increased above this wage rate.

At the wage rate, $12 demand will be 180. Supply will be 500. (actually, it's between 450 and 540 and not clearly readable in the graph.) Downward force active because it is above the market equilibrium.

At wages rate, $8 labor demanded is 900 and labor supply is 380. Upward market equilibrium because it is below the market equilibrium.

"True" Any wage rate below $10 will be binding in the market. because it is below the equilibrium price.