(20 pts) Table: The Market for Hamburger Flippers Price of Labor ($ per hour) Market for...

(20 pts) Table: The Market for Hamburger Flippers

Price of Labor ($ per hour)	Market for Hamburger Flippers
Price of Labor ($ per hour)	Quantity of Hours Demanded	Quantity of Hours Supplied
9	40	60
8	45	55
7	50	50
6	55	45
5	60	40

a) If the minimum wage in this market is $8, what is the effect on the market? Who are the winners and losers?

b) For hamburger flippers with a minimum wage of $8 per hour, can you imagine a scenario in which the deadweight loss from the minimum wage is lessened or even eliminated?

Solutions

Expert Solution

a) There is surplus labor of 10 hours. Winners are those who are able to supply the 45 hours of work at the higher wage. Losers are the firms now paying a wage higher than equilibrium. Additional losers are workers who are trying unsuccessfully to offer 10 hours that would not have been supplied at the equilibrium wage. Hamburger consumers may also be losers if the minimum wage requires an increase in the price of a hamburger.

b) Yes, if the demand for hamburger flippers increased i.e. shifted rightward, the surplus of hours at $8 would get smaller. If the new equilibrium price were $8, there would be no deadweight loss as a result of a minimum wage above equilibrium. It is possible that the economy is strong and many hamburgers are being sold, which would increase the demand for hamburger flippers. The surplus of $8 can also be eliminated by shifting the supply curve of hamburger flippers towards left , like through increased education.

Rahul Sunny answered 1 year ago

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