Question

In: Economics

what is potential loss of job search

what is potential loss of job search


what is firms surplus


what is workers surplus


what is deadweight loss
Wage rate (dollars per hour) E Minimum wage Quantity (millions of hours per year)


Solutions

Expert Solution

Minimum wage = M

D = quantity demanded

S = quantity supplied

Quantity with minimum wage = 1 = A

  1. Potential Loss = (Wage at demand A - Wage to supply A ) X A = (6-2) = $4 million.
  2. Firms Surplus = 0.5(Max willingness - M) X A = $0.5 million.
  3. Workers Surplus = 0.5(wage to supply 1 unit) A = $0.5 million.
  4. Deadweight loss = 0.5(Wage to demand A - Wage to supply A)(Difference in quantity) = 0.5(4)(2) = $4 million.

Have a nice day ahead!


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