Question

In this market, the equilibrium hourly wage is $ , and the equilibrium quantity of labor is thousand workers. Suppose a senator introduces a bill to legislate a minimum hourly wage of $6. This type of price control is called a .

Answer 1

Answer:

The equilibrium hourly wage is the wage where the curve of supply of labor intersects with that of the demand for labor. The same goes for the equilibrium quantity of labor.

The equilibrium hourly wage is $10, and the equilibrium quantity of labor is 450 thousand workers.

If a Senator introduces a minimum hourly wage, this is considered a Price Floor.

Price floors are prices that that the government mandates that one cannot charge below for a good or service. If there is a price floor on cake for instance, a person is not allowed to charge less than that price floor for cake. The Senator's bill is therefore saying that people should not be paid less than $6 an hour.