--%>
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 : Calculate the slope of the curve Normal

    Normal 0 false false

  • Q : Define One-Time Cost One-Time Cost : A

    One-Time Cost: A proposed or real expenditure that is non-recurring (generally only in one annual budget) and not permanently comprised in baseline expenditures. The departments make baseline adjustments to eradicate prior year one-time costs and suit

    		•
  • Q : Define the term Chapter Chapter : The

    Chapter: The reference allotted by the Secretary of State to an enacted bill, numbered in sequence in order of enactment each calendar year. The enacted bill is then termed to by this "chapter" number and the year in which it became law. For illustrat

    		•
  • Q : Describe how firm search optimal level

    Describe how a firm find out the optimal level of current assets. The optimal level of working capital is finding out by determining the amount that balances the requirement for liquidity and for profitability.

    		•
  • Q : What is a fund Fund: A lawful budgeting

    Fund: A lawful budgeting and accounting entity which offers for the segregation of moneys or other resources in the State Treasury for obligations in accordance with particular restrictions or limitations. A separate set of accounts should be maintain

    		•
  • Q : Reducing payroll costs It is likely

    It is likely that in the next few years, employers will face incresing pressures to reduce their payroll costs. critically evaluate the range of ways by which payroll costs can be reduced whilst taking into account the need to maintain a focus on the

    		•
  • Q : Consolidated balance sheets for the

    In the below table you will determine consolidated balance sheets for the chartered banking system & the Bank of Canada. Employ columns 1 through 3 to show how the balance sheets would read after each of transactions a to c is finished. Analyze

    		•
  • Q : Problem on banks Customers arrive at a

    Customers arrive at a bank with 2 tellers. The manager took the following data for 11 customers during a busy time. The manager has asked you to:(a) Create an event log. (b) Calculat

    		•
  • Q : Companies benefit most from stronger

    What type of U.S. companies would benefit most from a stronger dollar in the foreign exchange market? Describe. U.S. companies which import goods from other countries would benefit from a stronger dollar. More units of foreign currency could b

    		•
  • Q : Summer Co. is expected to pay a

    Summer Co. is expected to pay a dividend or $4.00 per share out of earnings of $7.50 per share. If the required rate of return on the stock is 15% and dividends are growing at a current rate of 10% per year, calculate the present value of the growth opportunity for the stock (PVGO)

    		•