O 50 100 150 200 250 300 350 400 450 500 LABOR (Thousands of workers) In this ma
ID: 1174440 • Letter: O
Question
O 50 100 150 200 250 300 350 400 450 500 LABOR (Thousands of workers) In this market, the equilibrium hourly wage is and the equilibrium quantity of labor is thousand workers. Suppose a senator introduces a bill to legislate a minimum hourly wage of $6. This type of price control is called a For each of the wages listed in the following table, determine the quantity of labor demanded, the quantity of labor supplied, and the direction of pressure exerted on wages in the absence of any price controls Labor Demanded Labor Supplied Wage (Dollars per hour) (Thousands of workers) (Thousands of workers) Pressure on Wages 12 True or False: A minimum wage above $10 per hour is not a binding minimum wage in this market. True False Grade It Now Continue without savingExplanation / Answer
In this market, the equilibrium hourly wage is $10, and the equilibrium quantity of labor is 250,000 workers.
Explanation:
The equilibrium hourly wage and quantity of workers occur at the intersection of the demand and supply curves. Using the graph input tool, we can see that this occurs at a wage of $10 per hour, which is where the quantity of labor that workers are willing to supply is equal to the quantity of labor firms demand (250,000 workers).
Suppose a senator introduces a bill to legislate a minimum hourly wage of $6. This type of price control is called a price floor.
Explanation:
The legislated minimum price is called a price floor, while a legislated maximum price is called a price ceiling. Because a wage is a kind of price, a minimum wage law is one example of a price floor.
For each of the wages listed in the following table, determine the quantity of labor demanded, thequantity of labor supplied, and the direction of pressure exerted on wages in the absence of any price controls.
At wage $8:
Labour demanded - 350,000
Labour supplied - 100,000
Pressure on wages - Upward.
At wage $12:
Labour demanded - 100,000
Labour supplied - 350,000
Pressure on wages - downward
Explanation:
At wage of $8 per hour, firms demand 350,000 workers, but only 100,000 workers want to work. Therefore, there is shortage of 250,000 workers. In the absence of a price floor, a shortage exerts upward pressure on wages until there is neither a surplus nor a shortage.
At a wage of $12 per hour, firms demand 100,000 workers, but 350,000 workers want to work. Therefore, there is a surplus of 250,000 workers. In the absence of a price floor, a surplus exerts downward pressure on wage until there is neither a surplus nor a shortage.
True or False:
A minimum wage below $10 per hour is a binding minimum wage in this market.
False
Explanation:
In order for a minimum wage to be binding—that is, in order for it to prevent the labor market from reaching equilibrium—it must be set above the equilibrium wage. In this case, you found that the equilibrium wage rate was $10 per hour. Therefore, any minimum wage above $10 per hour would be binding, and any minimum wage set below $10 per hour would not.
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