5) If the labor market was in equilibrium with a market wage of $10 an hour...

5) If the labor market was in equilibrium with a market wage of $10 an hour and the state of NJ implement a min wage law of $15 an hour. Explain what type of policy Murphy implemented impact this will have on the market. (i.e price floor or price ceiling) Hint Draw the graph and explain in detail this markets the labor market will have

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Expert Solution

As the price set is above the equilibrium price, the city has set a price floor. i.e. any wages below that price is not allowed, $15 is the lowest price in the market. It will increase the supply of labor and decrease the demand for labor at a higher wages leading to unemployment and surplus labor in the market.

Here, the market was at an equilibrium at point A, after the minimum wages are set, the new wages will increase to 15 and there will be a surplus in the market.

Rahul Sunny answered 1 year ago

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