If the equilibrium wage is $9 in the market for hotel workers and $8 in the...

If the equilibrium wage is $9 in the market for hotel workers and $8 in the market for restaurant workers and both markets have similar elasticities of labor supply and demand, then a minimum wage of $10 in both markets will:

	a.	cause more unemployment among restaurant workers than hotel workers.
	b.	cause more unemployment among hotel workers than restaurant workers.
	c.	cause the same amount of unemployment in both markets.
	d.	have no effect in either market.

Expert Solution

When the minimum wage is imposed,more of the restaurant workers, who initally had a lower wage compared to hotel workers, would be willing to work as compared to hotel workers.

Also demand for restaurant workers falls more.

The correct option is

a. Cause more unemployment among restaurant workers than hotel workers.

Rahul Sunny answered 2 years ago

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