5. Minimum-wage laws and unemployment
Consider the labor market defined by the supply and demand curves plotted on the following graph.
Use the calculator to help you answer the following questions. You will not be graded on any changes you make to the calculator.
Complete the following table with the quantity of labor supplied and demanded if the wage is set at $7.50. Then indicate whether this wage will result in a shortage or a surplus.
Hint: Be sure to pay attention to the units used on the graph and in the table. For example, type in 100 for 100,000 workers.
Wage | Labor Demanded | Labor Supplied | Shortage or Surplus? |
---|---|---|---|
(Thousands of workers) | (Thousands of workers) | ||
$7.50 |
Suppose the federal government contemplates a new law that would indicate national minimum wage of $7.50 per hour.
Which of the following statements are true? Check all that apply.
A. Binding minimum wages cause frictional unemployment.
B. In the absence of price controls, a shortage puts upward pressure on wages until they rise C. to the equilibrium.
D. In this labor market, a minimum wage of $7.50 is binding.
E. If the minimum wage is set at $10.50, the market will not reach equilibrium.