Question

1. Suppose that providing health insurance to workers costs employers $2 per worker-hour, and workers value the insurance at $3 per worker-hour.  
   1. What will happen to the equilibrium price and quantity of labor, graphically depicted below, if the government mandates that employers provide health insurance to their employees?  Answer the question graphically andin words.

Answer 1

that @ If the Government mandates that employers provide health insurance to their employees then this will increase the wage real their employees and and this increases the cost of hiring employees are workers. The employers will now try to substitute labor with other factors of production and thus demand for laber will reduce This can be depicted in the graph as- The initial equilibrium in the labor market occurs at point & The mandate will shift the labor demand curve leftwards to d' and thus at new equilibrium point El both the wage rate and labor employed has on fallen to Ong and ole respectively, Thus the mandate reduces both equilibrium price and equilibrium Quantity of labor employed. Wage Rate