--%>
Assignment Help - homework help

Question-total level of employment and equilibrium wage rate

The U.S. Congress raised the minimum wage from $4.25 per hour to $5.15 per hour in the year of 1996.  People suggested that a government subsidy could help employers finance the higher wage.  Assume the supply of low-skilled labour is as

         LS =10w

where LS is the quantity of low-skilled labour (in millions of persons employed each year) and w is the wage rate (in dollars per hour).  The demand for labour is specified by

                 LD = 80-10w

 

Assume that rather than a minimum wage, the government pays a subsidy of $1 per hour for each employee.  Determine total level of employment be now?  And equilibrium wage rate be?

Let w indicate the wage received by the employee.  Then the employer attaining the $1 subsidy per worker hour only pays w-1 for each worker hour.  As illustrated in below Figure, the labor demand curve shifts to:

                                                                          LD = 80 - 10 (w-1) = 90 - 10w,

Here w illustrate the wage received by the employee.

The new equilibrium will be specified by the intersection of the old supply curve along with the new demand curve, and thus, 90-10W** = 10W**, or W** = $4.5 per hour and L** = 10(4.5) = 45 million persons employed. 

 

1702_ans 33.png

   Related Questions in Finance Basics

  • Q : Describe patterns of cash flows for

    Describe two patterns of cash flows for a share of common stock. How does the market find out the value of the most common cash flow pattern for common stock?Cash flows for share of common stock contain dividend payments and the price attained f

    		•
  • Q : What do you mean by the term Year of

    Year of Appropriation (YOA): It refers to the initial year of an appropriation.

    		•
  • Q : Assignments i want to write final state

    i want to write final state report. My state is Texas. You can use the resources that i attached, also you can use another resources to cover the outlines.

    		•
  • Q : State Section 30.00 Section 30.00 : It

    Section 30.00: It is a Control Section of Budget Act which amends Government Code Section 13340 to tha sunset continuous appropriations.

    		•
  • Q : Does high operating leverage mean high

    Does high operating leverage for all time mean high business risk? Describe. High operating leverage does not for all time mean high business risk. If the company's sales are fairly stable then the variation into operating income would be smal

    		•
  • Q : Define Spot Bill Spot Bill : It is an

    Spot Bill: It is an introduced bill which makes non-substantive modifications in a law, generally with the intent to amend the bill at a later date to comprise substantive law modifications. This procedure gives a means for circumventing the deadline

    		•
  • Q : What are A-pages A-pages : An ordinary

    A-pages: An ordinary reference to the Governor's Budget synopsis. The Budget highlights now contained in the Governor's Budget synopsis were just once contained in front of the Governor's Budget on pages A-1, A-2, and so on, and were,

    		•
  • Q : Semiannua compounding It is now January

    It is now January 1. You plan to make a total of 5 deposits of $600 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 14% but uses semiannual compounding. You plan to leave the money in the bank for 10 years. How much will be in your account

    		•
  • Q : Equilibrium GDP for this hypothetical

    Normal 0 false false

  • Q : Public finance can you do this

    can you do this homework? My state Taxes

    		•