1.    (20 marks) Suppose that the market for labour is a competitive market and  can be described by the following demand and supply curves:
D = 120,000 – 5,000W
S = 5,000W – 60,000
Where W = wage rate per hour for labour
(a)Â Â Â Â Â (3 marks)Â Calculate the equilibrium wage rate and quantity of labour employed and draw a diagram to illustrate your answer.
(b)Â Â Â Â Â Â (4 marks)Â Show on your diagram and calculate the size of the:
(i)Â Â Â Â Consumer/firm surplus
(ii)Â Â Â Producer/worker surplus
(iii)Â Â Economic Surplus
Note: the economic surplus is equal to the sum of consumer surplus and producer surplus.       Â
(c)Â Â Â Â Â Â Â (3 marks)Â Suppose that the government imposes a minimum wage of $20.00 per hour.
(i)Â Â Â Â Â How many workers are now employed?
(ii) Â Â Calculate the amount of the surplus or shortage of workers created by the imposition of the minimum wage.
(d)Â Â Â Â Â Â (5 marks)Â Calculate the size of the (i) consumer/firm surplus (ii) producer/worker surplus (iii) economic surplus and (iv) deadweight loss following the introduction of the minimum wage $20.00 per hour.
(e)Â Â Â Â Â (5 marks)Â Following the introduction of the minimum wage explain if:
(i) Firms are better off?
(ii) Workers are better off?
 (iii) Society is better off?Â
Answers
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Posted 17 May 2017 04:05 AM
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