Author Question: Explain how low-skilled workers might actually be made worse off from a minimum wage law in terms of ... (Read 110 times)

lbcchick · **on:** Jun 29, 2018

Explain how low-skilled workers might actually be made worse off from a minimum wage law in terms of working conditions and job training. In addition, what might be the long-run impact on wages and earnings?

What will be an ideal response?

Question 2

Consider indifference curves for goods X and Y. Suppose we plot the quantity of good Y on the vertical axis and the quantity of good X on the horizontal axis.

a. Why are indifference curves downward sloping?
b. What is the economic interpretation of the slope of an indifference curve?
c. Following what we learned in the Appendix to this chapter, indifference curves would flatten out as someone consumes more of good X and less of good Y. What are we assuming when we draw indifference curves that become flatter?

vickyvicksss · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Essentially employers are not being allowed to offer lower wages to workers in exchange for more on-the-job training. Therefore, it is at least reasonable to assume that in the face of having to pay higher wages per hour that firms may simply react by providing less training. In the end this may actually have the effect of making workers less productive than they might otherwise be and lead to a reduction in life-time wages and earnings.

Answer to Question 2

a. Consumers are indifferent among all bundles on the same indifference curve. If indifference curves were upward sloping then a consumer would be indifferent between a bundle that has more of good X and more of good Y than a second bundle that includes less of both goods. This would make no sense, and so indifference curves must be downward sloping.
b. The slope of an indifference curve shows a consumer's willingness to trade good Y for an additional unit of good X.
c. If indifference curves become flatter then we are assuming that consumers are less willing to give up Y in return for an additional unit of X as they consume more X and less Y.