Consider two alternative policies intended to benefit low-skilled workers: imposing a binding minimum wage, or introducing a per-worker subsidy ( physically paid to firms) for employing a)How low-skilled workers. would each policy (individually) affect the wage and employment of low- skilled workers? (Notice that we have adjusted the points to reflect that part ( a) is more complex and requires a longer answer than part (b).) b)Suppose each policy would increase the wage of low-skilled workers by the same amount. Which policy would benefit people with low skills more?

Consider two alternative policies intended to benefit low-skilled workers: imposing a binding minimum wage, or introducing a per-worker subsidy ( physically paid to firms) for employing a)How low-skilled workers. would each policy (individually) affect the wage and employment of low- skilled workers? (Notice that we have adjusted the points to reflect that part ( a) is more complex and requires a longer answer than part (b).) b)Suppose each policy would increase the wage of low-skilled workers by the same amount. Which policy would benefit people with low skills more?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Problem 4: Price Interventions Suppose that, in the absence of government intervention, the supply and demand schedules for PA graduates is as follows: Quantity of PA majors willing Quantity of Jobs Offered to to work (supply their labor) Salary PA majors (demand for PA labor) $45,000 $40,000 $35,000 $30,000 $25,000 4000 2000 3500 2500 3000 3000 2500 3500 2000 4000 a) Sketch the labor market for public affairs majors and indicate the equilibrium salary and quantity of jobs. b) Suppose that the government instituted a minimum starting salary for all college graduates, including public affairs majors, of $40,000. On your graph, indicate the impact of this minimum salary on the market for public affairs majors. Be sure to indicate the new quantity of jobs offered/supplied and the amount of any surplus (a.k.a. unemployment) or shortage of PA major labor.
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(c) Let us now turn to the labor market for grocery store workers in Little town. Recently one of the last two grocery stores in Little town closed leaving only one employer for grocery store workers in this area. This labor market is not very competitive. What type of market structure is this? (d) Draw a typical supply curve (i.e. average expenditure), marginal expenditure, and demand for the grocery store in Little Town. Label the equilibrium wage and number of grocery store workers. (e) Suppose that some time has passed and the population has grown in Little Town and there are now many grocery stores. Now suppose that the grocery store workers unionize. Draw a graph to depict the equilibrium wage and number of workers in this new market.
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