Question

4. Minimum wage legislation The following graph shows the labor market in the fast-food industry in the fictional town of Supersize City. 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 20 18 16 14 12 10 1 Wage (Dollars per hour) Labor Demanded (Thousands of workers) 900 Labor Supplied 378 workers) Demand o 90 180 270 360 450 540 630 720 810 900 LABOR (Thousands of workers) , and the equilibrium quantity of labor is thousand workers. In this market, the equilibrium hourly wage is s Suppose a senator introduces a bill to legislate a minimum hourly wage of $6. This type of price control is called a

Answer 1

1) Market for labour :

From the graph

Wage = $6

Qd = 900

Qs = 378

2) From graph

The point where demand and supply curve meet

Equllibrium price = $10

Equllibrium quantity = 450

3) The price control to pay minimum hourly wage of $6 is called as price floor.

Price floor is always kept to see that minimum legal price is their for effective functioning of the society.

4) From graph

At wage = 12$

Qd = 225

Qs = 477

Pressure on wages will be nil as there is less demand and excess supply

At wage = 8$

Qd = 684

Qs = 405

At this wage rate the demand for labour is more and supply is less so pressure on wages increase as they need to meet the demand.

5) False , the minimum wage is $6 in this market so any wage paid below $6 is less than binding minimum wage but not below $10