(a) Solve for the equilibrium wage and employment level.(b) Graph the demand and supply curves.(c) At this equilibrium, what is your welfare/gains from trade?(d) Now, assume a minimum wage has been implemented at $20. How will this impact yourdemand? Supply?(e) How many workers are displaced by this new policy? How much “extra” unemployment occurswith this new policy? Hint: Think about the reservation wage.(f) Graph the new labor demand and supply with this minimum wage.(g) At this equilibrium, what is your new welfare? Are you better off with this change? Explain. Problem 2Let's assume you’ve found the following labor demand and supply curves:Lp30 – wLs= 2w(a) Solve for the equilibrium wage and employment level.(b) Graph the demand and supply curves.(c) At this equilibrium, what is your welfare/gains from trade?(d) Now, assume a minimum wage has been implemented at $20. How will this impact yourdemand? Supply?(e) How many workers are displaced by this new policy? How much “extra" unemployment occurswith this new policy? Hint: Think about the reservation wage.(f) Graph the new labor demand and supply with this minimum wage.(g) At this equilibrium, what is your new welfare? Are you better off with this change? Explain.

Answered: Problem 2 Let's assume you've found the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

(a) Solve for the equilibrium wage and employment level.
(b) Graph the demand and supply curves.
(c) At this equilibrium, what is your welfare/gains from trade?
(d) Now, assume a minimum wage has been implemented at $20. How will this impact your
demand? Supply?
(e) How many workers are displaced by this new policy? How much “extra” unemployment occurs
with this new policy? Hint: Think about the reservation wage.
(f) Graph the new labor demand and supply with this minimum wage.
(g) At this equilibrium, what is your new welfare? Are you better off with this change? Explain.

Problem 2
Let's assume you’ve found the following labor demand and supply curves:
Lp
30 – w
Ls
= 2w
(a) Solve for the equilibrium wage and employment level.
(b) Graph the demand and supply curves.
(c) At this equilibrium, what is your welfare/gains from trade?
(d) Now, assume a minimum wage has been implemented at $20. How will this impact your
demand? Supply?
(e) How many workers are displaced by this new policy? How much “extra" unemployment occurs
with this new policy? Hint: Think about the reservation wage.
(f) Graph the new labor demand and supply with this minimum wage.
(g) At this equilibrium, what is your new welfare? Are you better off with this change? Explain.

Expert Solution

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Hi! Thank you for the question, As per the honor code, we are allowed to answer three sub-parts at a time so we are answering the first three as you have not mentioned which of these you are looking for. Please re-submit the question separately for the remaining sub-parts.

Answer:

Given, labor demand function and labor supply function respectively:

$L_{D} = 30 - w L_{S} = 2 w$

(a). At equilibrium, the number of laborers demanded and the numbers of labor supplied will be equal.

$L_{D} = L_{S} 30 - w = 2 w 30 = 2 w + w 30 = 3 w w = \frac{30}{3} w = 10 L e t u s s u b s t i t u t e t h e v a l u e o f w = 10 i n e i t h e r d e m a n d o r s u p p l y f u n c t i o n N o t e : a t t h e e q u i l i b r i u m w a g e b o t h f u n c t i o n s w i l l g i v e s a m e n u m b e r s L = 2 \times 10 L = 20$

Equilibrium wage = 10

Employment level = 20

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