Labor Supply in an industry is given by ES = 10 + w and labor demand...

Labor Supply in an industry is given by ES = 10 + w and labor demand is given by ED = 40 − 4w, where E is the level of employment and w is hourly wage rate.

1) Draw the supply and demand curves and find the competitive equilibrium wage and employment level.

2) What is the unemployment rate at this equilibrium?

3) Calculate the producer and worker surplus

4) Suppose that the government imposes a minimum wage of $8 per hour. What is the new employment level in the economy?

5) How many additional workers in the economy would want to work at the minimum wage? What is the unemployment rate?

6) Calculate the producer and worker surplus after the introduction of minimum wage. What is the deadweight loss?

Expert Solution

Kindly refer to the images below for the answers to sub-parts one through four.

Rahul Sunny answered 1 year ago

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