In: Economics
Here are listed the supply and demand schedule for labor hours in France. This country has several restrictive laws & strikes! Wage Quantity Supplied Quantity Demanded 10 3,000 5,000 12 3,500 4,500 14 4,000 4,000 16 4,500 3,500 18 5,000 3,000 Identify new equilibrium price and quantity if a minimum wage law is enacted for Wage = 12 euros an hour. What happens to the market wage if the trade union restricts the supply of labor hours to 3,000? Identify new equilibrium price and quantity if a minimum wage law is enacted for Wage = 16 euros an hour. Suppose that there is a labor trade union that wants to maximize the revenues of all workers. Which wage and quantity of labor hours supplied should the trade union propose? Discuss (no computations needed): What would be the effects in the labor market of a law that restricts the workweek to 35 hours?
Table
Wage | Qs | Qd |
10 | 3000 | 5000 |
12 | 3500 | 4500 |
14 | 4000 | 4000 |
16 | 4500 | 3500 |
18 | 5000 | 3000 |
1) as eqm wage = 14
So if minimum wage = 12, which is below than eqm level, then it is not binding, it will have no effect , bcoz market clearing wage is already higher than Min wage
So new eqm wage w*= 14
labor Q*= 4000
2) if Labor supply restricted to 3000, then Market wage will fall to $ 10
3) minimum wage = 16, > Market clearing wage
Then it will be binding,
So eqm Q = 3500
w = 16
4) at revenue Maximization,
Maximize : W*Q
So choose W = 18, & Labor supplied = 5000
So max TR= 18*5000
= 90,000