In 2010, the country of Ruba was suffering from a period of high unemployment. The new president, Clang, appointed Laurel Tiedye as his chief economist. Ms. Tiedye and her staff estimated these supply and demand curves for labor from data obtained from the secretary of labor, Robert Small:
where Q is the quantity of labor supplied/demanded in millions of workers and W is the wage rate in slugs, the currency of Ruba.
a. Currently, the law in Ruba says that no worker shall be paid less than 9 slugs per hour. Estimate the quantity of labor supplied, the number of unemployed, and the unemployment rate.
b. President Clang, over the objection of Secretary Small, has recommended to the congress that the law be changed to allow the wage rate to be determined in the market. If such a law was passed and the market adjusted quickly, what would happen to total employment, the size of the labor force, and the unemployment rate? Show the results graphically.
c. Will the Rubanese labor market adjust quickly to such a change in the law? Why or why not?