--%>
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 : Explain financial markets Explain

    Explain financial markets? Why do they exist?In financial markets, financial securities are bought and sold. They exist chiefly to bring deficit economic units (those needing money) and surplus economic units (those have extra money) together.

    		•
  • Q : Question based on consolidated balance

    Normal 0 false false

    		•
  • Q : Define Bill Bill : It is a draft of

    Bill: It is a draft of proposed law represented to the Legislature for performance. (A bill has bigger legal formality and standing than a resolution.) OR An invoice, or document statement, of an amount owing for s

    		•
  • Q : Components of the M1 money supply

    Normal 0 false false

  • Q : Fiscal policy to preserve the size of

    Normal 0 false false

    		•
  • Q : Explain Generally Accepted Accounting

    Generally Accepted Accounting Principles (GAAP): The accounting rules, principles, conventions, and procedures which are employed for accounting and financial reporting. The GAAP for governments are put by the Governmental Accounting Standards Board (

    		•
  • Q : Types of legal barriers to market entry

    Types of legal barriers to market entry exist: Kinds of legal barriers which make that difficult for the newer drug in the generic form towards entering market have been lack of the rigorous assessment about the patentability needs; thirty mouth stay

    		•
  • Q : Mergers encourage the formation of new

    Do mergers encourage the formation of new banks? Yes. The increase in the number of new banks in the second half of the 1990s coincides with a surge in merger activity in the similar period. A study conducted through the Federal Reserve Bank of

    		•
  • Q : Describe Schedule 7A Schedule 7A : The

    Schedule 7A: The summary version of the State Controller’s Office detailed Schedule 8 position register for each department. The information replicated in this schedule is the base for the “Salaries and Wages Supplement” exhibited on

    		•
  • Q : Four supply factors of economic growth

    Normal 0 false false