Answer to Question #304079 in Microeconomics for Andrew Harry

Question

In the labour market, workers would like to receive higher wages and firms would like to pay lower

wages.

a. Suppose that workers succeed in having a minimum wage established above the equilibrium

wage. What will happen to the number of workers employed when compared to the original

equilibrium?

b. Suppose that firms succeed in having a maximum wage established below the equilibrium wage.

What will happen to the number of workers employed compared to the original equilibrium?

c. What wage maximizes the number of workers employed? Why?

Answer 1

a) The number of employed workers will be lower with a minimum wage rate established compared to when it wasn't in effect.

b) The number of people employed will be more when the maximum wage rate is below the equilibrium wage because most will be underpaid.

c). Where minimum wage is equal to equilibrium wage, they are at optimal.