Post by: nmorano1 on May 24, 2019
The figure above illustrates the current market for fast-food workers in Baltimore.
a. Without any government intervention, what is the equilibrium wage rate and amount of employment?
b. If the city government imposes a minimum wage of $3 an hour, what is the amount of employment? Does the minimum wage create any unemployment? Why or why not?
c. If the city government imposes a minimum wage of $6 an hour, what is the amount of employment? Does the minimum wage create any unemployment? Why or why not?
Post by: akemokai on May 24, 2019
b. Employment remains 8,000 workers. The minimum wage does not create any unemployment. The $3 per hour minimum wage does not bring about any unemployment because it is below the equilibrium wage rate.
c. Employment decreases to 4,000 workers, the quantity of labor demanded at a wage rate of $6 per hour. At the wage rate of $6 per hour, the quantity of labor supplied is 12,000 workers and the quantity of labor demanded is 4,000 workers. Hence there are 8,000 workers unemployed. The minimum wage of $6 an hour creates unemployment because it is higher than the equilibrium wage rate. As a result, the quantity of labor supplied increases and the quantity of labor demanded decreases, leading to a situation of excess supply, or unemployment.
Post by: nmorano1 on May 24, 2019
Post by: akemokai on May 24, 2019
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