Consider the market for waitpersons. For each of the following, show each change
ID: 1119351 • Letter: C
Question
Consider the market for waitpersons. For each of the following, show each change in a demand and supply diagram. Identify the end result on wages and employment.
a.Several restaurants are shut down for health violations and working in a restaurant is found to be hazardous to workers' mental health.
b.The government increases the minimum wage for waitpersons.
c.McDonalds starts a new promotion and cuts it prices in half. Due to a bad recession college graduates start looking for jobs as waitpersons.
d.The dishwashers union strikes for (and receives) higher wages. Waitpersons and dishwashers are substitutes in production
e.Due to a draught, food prices rise.
Explanation / Answer
(a) Restrictions are being put on working in the restraunts which means that the demand for waitpersons is low and the supply is high. This means that the supply curve will move to the right as the supply will go up.
The wages will go down as the supply is more and demand is less. So there will be people to work for low wage. This will reduce wages. This will also create unemploymnet as the demand for waitpersons is low.
(b) The increase in the minimum wages will mean that the demand for the waitpersons will go up. This will mean that the demand curve will shift to the right. This will increase wage and employmnet in the economy.
(c) The supply of waiters has gone up because people are dropping out for the waiter job, This will mean that the demand curve will shift to the right. This will increase wage and employmnet in the economy.
(d) In the absence of dishwashers, waiters will be substituted and this will increase their demand. This will mean that the demand curve will shift to the right. This will increase wage and employmnet in the economy.
(e) With the increase in food prices, the cost of production will go up, This will mean that the minimum wages will reduce and waitpersons might be asked to leave their jobs because the restraunts won't be able to the waiters. So the demand will move to the right. This will decrease the wages and employment in the economy.