in this market, the equilibrium hourly wage is $10, and the equilibrium quantity of labour is 300,000…

in this market, the equilibrium hourly wage is $10, and the equilibrium quantity of labour is 300,000 workers. suppose a senator introduces a bill to legislate a minimum hourly wage of $8. this type of price control is called a \n\nfor each of the wages listed in the following table, determine the quantity of labour demanded, the quantity of labour supplied, and the direction of pressure exerted on wages in the absence of any price controls.\n\nwage (dollars per hour) labour demanded (thousands of workers) labour supplied (thousands of workers) pressure on wages\n14 180 420 \n6 420 180 \n\ntrue or false: a minimum wage above $10 per hour is not a binding minimum wage in this market.\ntrue\nfalse

in this market, the equilibrium hourly wage is $10, and the equilibrium quantity of labour is 300,000 workers. suppose a senator introduces a bill to legislate a minimum hourly wage of $8. this type of price control is called a \n\nfor each of the wages listed in the following table, determine the quantity of labour demanded, the quantity of labour supplied, and the direction of pressure exerted on wages in the absence of any price controls.\n\nwage (dollars per hour) labour demanded (thousands of workers) labour supplied (thousands of workers) pressure on wages\n14 180 420 \n6 420 180 \n\ntrue or false: a minimum wage above $10 per hour is not a binding minimum wage in this market.\ntrue\nfalse

Answer

Explanation:

Step1: Define price - control type

A minimum wage is a price - floor. A price - floor is a legal minimum price. Since the proposed minimum wage of $8 is below the equilibrium wage of $10, it is a non - binding price floor.

Step2: Analyze wage of $14

When the wage is $14, the quantity of labour supplied (420,000) is greater than the quantity of labour demanded (180,000). There is a surplus of labour, so there is downward pressure on wages to move towards the equilibrium.

Step3: Analyze wage of $6

When the wage is $6, the quantity of labour demanded (420,000) is greater than the quantity of labour supplied (180,000). There is a shortage of labour, so there is upward pressure on wages to move towards the equilibrium.

Step4: Determine binding minimum wage

A binding minimum wage is one that is above the equilibrium wage. Since the equilibrium wage is $10, a minimum wage above $10 is binding. So the statement “A minimum wage above $10 per hour is not a binding minimum wage in this market” is False.

Answer:

  1. Type of price control: Non - binding price floor
  2. Wage = $14: Downward
  3. Wage = $6: Upward
  4. True or False: False