Question

6. Suppose that the supply curve for school teachers is Ls - 20,000 + 350W and the demand curve for school teachers is Ld = 100,000 - 150W, where L = the number of teachers and W= the daily wage. a. Plot the demand and supply curves. b. What are the equilibrium wage and employment level in this market? c. Now suppose that at any given wage 20,000 more workers are willing to work as school teachers. Plot the new supply curve and find the new wage and employment level. Why doesn't employment grow by 20,000? 7. Comment on the following quotation: "One way that a minimum wage could result in expanded employment is if the government sets the minimum below the market equilibrium wage."

Answer 1

As per policy we have to answer first question

1) Enclosed graph. In the graph when for example, W = 500, Ld=100,000 - 150 * 500 = 25,000 workers; and when W = 400, employers desire 40,000. GRAPH $667 2) To find the equilibrium Ls=Ld (20,000 + 350W)=(100,000 - 150W) W = $160 per day L = 20,000 + 350 * 160 = 20,000 + 56,000 = 76,000 schoolteachers (25.000, $500) Wages (40,000, $400) IS' $160 I 3) New labor supply curve is Ls' = 40,000 + 350W. Setting Ls'=Ld 40,000 + 350W = (100,000 - 150W) W = $120 per day L = 40,000 + 350 * 120 = 82,000 school teachers The employment doesn't increase by 20,000 because the shift in the supply curve would lead to a decline in the wage thus induces few teachers to exit out of the market $120 Ld 20,000 40,000 76,000 100,000 82,000 Number of Workers