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The supply curve of work requiring a high school degree or less is QS = -...

The supply curve of work requiring a high school degree or less is QS = - 13,000 + 2000P and the demand for such work is QD = 11,000 - 1000P. Assume this is a competitive market.

1. What is the market wage and quantity?

2. What quantity is hired if a minimum wage of $10 is imposed? What is the deadweight loss (DWL) of this policy?

3. Instead of a minimum wage, policymakers introduce a $1.5 wage subsidy (think EITC). What is the quantity of work supplied under this policy? What is the DWL of this policy?

4. What percentage of the subsidy is captured by the employers? (Hint: the buyer's burden is represented by ϵ S ϵ S − ϵ D)

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Rahul Sunny answered 2 years ago
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