Answer to Question 1
The workers who retain their jobs and are paid the higher wage rate gain from the minimum wage. The employer, the workers who lose their job, and workers who must undertake extensive search for a job lose from the minimum wage. The minimum wage of 11.50 an hour is not ef-ficient. There is a surplus of workers and the marginal benefit to firms ex-ceeds the marginal cost to workers. A deadweight loss is created. The minimum wage is unfair under the fair results approach because some student workers lose their jobs. The minimum wage is unfair under the fair rules approach because it blocks voluntary exchange.
Answer to Question 2
Consistency in the choices that an individual makes is referred to as transitivity. Preferences are transitive if the following is true: if an individual prefers choice A to choice B and choice B to choice C, then it is implied that she prefers choice A to choice C. Transitivity is considered a minimal requirement for rational decisionmaking because without it an individual could end up in an infinite and frustrating cycle. If the individual's choices were not transitive, she would first choose Choice A over Choice B, then Choice B over Choice C, but then opt for Choice C over Choice A, which is inconsistent with her earlier choices.
A-head: CONFLICT OF INTEREST AND POLITICAL ECONOMY
Concept: Transitive preferences
The Periodic Table
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