Question #1ed27

1 Answer
Nallasivam V
Sep 10, 2015

Equilibrium wage $.4

Explanation:

#Q_d=10000-100W#
#Q_s=2000+1900W#
Equilibrium wage is determined when #Q_d = Q_s#
So we have -
#10000-100W=2000+1900W#
Solve it for W
#-100W-1900W=2000-10000#
#2000W=-8000#
#W=(-8000)/(-2000)=4#

Substitute #W=4# in demand function
#Q_d=10000-100(4)=10000-400=9600#

Equilibrium wage is $.4.
Equilibrium demand for and supply of workers is 9600.
Minimum wage fixed by the Government is $.5

[The government is not regulating the market forces after fixing the minimum wage. The market forces have their own course. The employers will move up along the supply curve and operate at point A. Then -]

At $.5 wage #Q_d=10000-100(5) = )# 9500 workers will be employed.

100 workers will lost their jobs.
This is how it alters the market.
The New payment to the workers is #=9500 xx $5 =$ 47500#
The original wage payment is #=9600 xx $4 = $38400#

[The minimum wage fixation is not conferring benefit on all. Some workers get more wages at the expense of others who lost their jobs.]
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