Problem
Low-skilled workers operate in a competitive market. The labor supply is QS = 10W (where W is the price of labor measured by the hourly wage) and the demand for labor is QD = 240 - 20W. Q measures the quantity of labor hired (in thousands of hours).
(a) What is the equilibrium wage and quantity of low-skilled labor working in equilibrium?
(b) If the government passes a minimum wage of $10 per hour, what will be the new quantity of labor hired? Will there be a shortage or surplus of labor? How large?
(c) What is the deadweight loss of this price floor? (Calculate the value.)
(d) How much better off are low-skilled workers in this case (in other words, how much does producer surplus change) and how much worse off are employers? (Calculate the values.)
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.