Answer to Question #64173 in Economics for Ven

Question

1.
a) The Australian government decides to pay $3 a loaf for all the bread that cannot be sold in a competitive market at the price. At the end of each week, the government purchases 1 million loaves of bread. Use a supply and demand graph to show whether the market equilibrium price is less or more than $3 per loaf. Explain your answer in words as well.
b) Most government policy decisions have winners and losers. What are the effects of the government raising the minimum wage for workers? Who are the winners and who are the losers when the minimum wage is raised?

Answer 1

1.a) If the Australian government decides to pay $3 a loaf for all the bread that cannot be sold in a competitive market at the price and at the end of each week, the government purchases 1 million loaves of bread then the market equilibrium price is more than $3 per loaf, because there is a surplus in the market and the price is above the equilibrium.
b) If the government raise the minimum wage for workers, then the winners are less qualified workers, who will receive the increase in wage, and the losers are the employers, because they will be obliged to pay higher salaries.