In The F MINDTAP Aplia Homework: Supply and Demand: An Initial Look 11. Minimum
ID: 1127315 • Letter: I
Question
In The F MINDTAP Aplia Homework: Supply and Demand: An Initial Look 11. Minimum wage legislation The following graph shows the labor market in the fast-food industry in the fictional town of Supersize Oty. In a labor market, workers supply their labor to the market in exchange for wages, and their behavior is represented by the supply curve. Similarly, firms pay wages to obtain labor, and thus their behavior is represented by the demand curve. In this way, wages are the price of labor Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool Market for Labor in the Fast Food Industry Dolars per hour) Labor Demanded Labor Supplied (Thousands of 600 10 o 80 160 240 320 400 480 560 640 720 800 LABOR (Thousands of workers)
Explanation / Answer
Equilibrium occurs at the point where labor demand is equal to labor supply. In the diagram above, the equilibrium wage rate is $10 and equilibrium quantity of labor at $10 is 400 thousand workers.
A minimum wage of $8 is referred to as price floor.
In order to fill the labor demanded and labor supplied use the graph tool calculator given in the question as exact values cannot be interpreted from the graph. Also, at wage of $4, there is surplus of labor and thus wages will decrease. At $6, there will be shortage of labor and thus wages will increase.
True. Any wage below the equilibrium wage rate is binding.
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