Question

1. What is the effect of a binding minimum wage?

2. There is a supply and a demand curve, with three prices, above at and below equilibrium. If one of those prices is imposed by the government, what happens/

3. Got a supply and demand curve, which areas make up economic surplus?

4. What is marginal utility?

5. What is the utility maximization condition?

Please answer all 5 questions, with example or a scenario that can relate to these questions please and thanks!!

Answer 1

1. The effect of minimum wage is in both ways positive as well as negative. A increase in minimum wage will lift some families out of poverty. On the other hand minimum wage increase unemployment among low skilled workers, because binding minimum wage bind the employer to pay high wage, at that time employer not hier low skilled workers.

2. If government impose price above the equlibrium than there is surplus in the market because when price is more than equlibrium the supply is greater than demand.

If government impose price below the equlibrium than there is shortage of given good in the market because at lower price demand is more than supply.

When the price is equal to equilibrium there is no shortage no surplus in the market.

3. Economic surplus is the sum of consumer surplus and producer surplus. Consumer surplus is the area above the price and below the demand curve

Whereas the producer surplus is the area below the price and above the supply curve.

4. Marginal utility is the additional utility derived from the consumption of one more unit ofbthe given commodity.

MUn = TUn - TUn-1

5. The utility maximization condition is the point where total utility reaches its maximum and marginal utility become zero. This point is also known as the point of maximum satisfaction.