PQ5.1Case:Supply of Low-Skilled Labor is given by:L³= 10wLabor Demand is given by:LP = 80 - 10wLS = Quantity of Low-Skilled Labor Supplied (Millionsof Workers per Year)IP = Quantity of Labor Demanded (Millions of Workersper Yearw = Wage Rate (Dollars per Hour)Questions:(a) What will be the Free-Market Wage Rate -if Wage Rate = Price for 1 Labor?(b) What will be the Free-Market Employment Level -if Wage Rate = Price for 1 Labor?(c) How Many People would then be Employed -If the Government sets a minimum wage of $5 per hour?

Answered: PQ5.1 Case: Supply of Low-Skilled Labor…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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PQ5.1
Case:
Supply of Low-Skilled Labor is given by:
L³= 10w
Labor Demand is given by:
LP = 80 - 10w
LS = Quantity of Low-Skilled Labor Supplied (Millions
of Workers per Year)
IP = Quantity of Labor Demanded (Millions of Workers
per Year
w = Wage Rate (Dollars per Hour)
Questions:
(a) What will be the Free-Market Wage Rate -
if Wage Rate = Price for 1 Labor?
(b) What will be the Free-Market Employment Level -
if Wage Rate = Price for 1 Labor?
(c) How Many People would then be Employed -
If the Government sets a minimum wage of $5 per hour?

Expert Solution

Step 1: Define Market Equilibrium

Market equilibrium in the labor market refers to a situation where the supply of labor (the number of people willing and able to work at a certain wage rate) is equal to the demand for labor (the number of workers that employers are willing to hire at that wage rate). In this equilibrium, there is no shortage or surplus of labor, and the wage rate is stable.

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