Please answer them briefly and short answers. Thanks in advance! Suppose the inv
ID: 1116425 • Letter: P
Question
Please answer them briefly and short answers. Thanks in advance!
Suppose the inverse labor supply curve is: w-5L. The inverse labor demand curve is: w=100-20L 7. Solve for the competitive market equilibrium (CME) wage and employment level. 8. Is there any unemployment at the CME? 9. Ir thergovemment sets a minimum wage at S0, what is the r the government sets a minimum wage at $40, what is the resulting quantity of labor supplied and f labor supplied and demanded? 10. What happened to the employment level after the government imposed a minimum wage in this model? 11. Under what conditions could a minimum wage actually increase employment? 12. Under the minimum wage policy, how many unemployed workers are there?Explanation / Answer
Market equilibrium wage is same so we equate the two equation of supply and demand for labor
5L = 100 - 20L
25L = 100
L = 4 units
W = 5*4 = 20
There is full employment at a wage rate of 20. The quantity supplied of labor of 4 equals the quantity of labor which is looking for employment.
If the wage is set at 40, then supply of labor, 5L = 40, L = 8(SUpply of labor will increase from 4 to 8 units)
If the wage is set at 40, then demand of labor, 20L = 100-40, L = 3 (Demand for labor will decrease from 4 to 3 units)
Surplus labor equals = 8-3 = 5, this means that 5 units of labor will remain unemployed.