Description
ECON 111 Handout for class
1. Consider the federal minimum wage law.
(a) Suppose the minimum wage is above the equilibrium wage in the market for unskilled labor. Using a
supply and demand diagram of the market for unskilled labor, show the market wage, the number of workers who are employed, and the number of workers who are unemployed. Also show the total wage payments to unskilled workers (this is the wage times the number of workers).
- (b) If the demand for unskilled labor were inelastic, would a proposed increase in the minimum wage raise or lower total wage payments to unskilled workers?
- (c) How would your answer change if the demand for unskilled labor were elastic?
- This year, weather events severely reduced the lemon crop in California.
(a) Explain what happens to consumer surplus in the market for lemons. Illustrate your answer with a diagram. (b) Explain what happens to consumer surplus in the market for lemonade. Use a diagram. Attached is the worksheet to fill in the answers
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Explanation & Answer
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Running head: ECON111
1
ECON111
Name
Course
Tutor
Date
ECON111
2
Federal Minimum Wage Law
1.
Wage
Labour
surplus
Minimum wage
Wage
payment
Labour demand
Quality of labour
Quality demand
Quality supply
b.
The total wage of the unskilled labour will raise due the increase on the wage as it is the
parameter that changes while the labour demand is inelastic meaning it will remain the same
therefore the wages will increase on the already present unskilled labour and this will end up
influencing the total wage as it will be marked with an increase from the increased wage on
unskilled labour.
c.
If the demand for the unskilled labour was elastic this means there will be increase all
across and the only factor that will change is that the will be a great change in the total wage
increase all across than the increase that was recorded ...