c. Now suppose a minimum wage is legislated at a level higher than W*, i.e. WMIN>W*. Show it in the diagram and explain what the labour market outcomes will be. d. Now suppose a workers’ union is created and successfully negotiates wage WUNION, which is above both W* and WMIN, i.e. WUNION>WMIN>W*. Explain what the labour market outcomes will be compared to the previous part.
PLEASE SOLVE PART C & D ONLY
Minimum Wages and Unions
a. Assume an industry without legal minimum wages and unions. Show in a diagram how the equilibrium
wage W* is determined, and briefly explain all the concepts in the diagram.
b. Now suppose a minimum wage, WMIN, is legislated at a level lower than W*, i.e. WMIN<W*. Show it in the
diagram and explain whether the labour market outcomes in part a. change, and how.
c. Now suppose a minimum wage is legislated at a level higher than W*, i.e. WMIN>W*. Show it in the
diagram and explain what the labour market outcomes will be.
d. Now suppose a workers’ union is created and successfully negotiates wage WUNION, which is above both
W* and WMIN, i.e. WUNION>WMIN>W*. Explain what the labour market outcomes will be compared to the
previous part.
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