Question

Now suppose that Congress, concerned about the welfare of the working class, passes a law setting a minimum wage that is 10 percent above the current equilibrium wage. Assuming that Congress cannot dictate how many workers are hired at the mandated wage, calculate what happens to the real wage, employment, output, and the total amount earned by workers.

Answer 1

Answer:

hello your question is incomplete attached below is the complete question

A )   $7.766

B )   4350 workers

C )   61777.20

D )    $33782.10

Explanation:

A) Real wage = 4 *  $(\frac{K}{L} )^{0.2}$

 where ; K = 120000,  L = 7000

   hence Real wage = 7.06  before 10% increase

After 10% increase ; Real wage =  7.06 + (7.06 * 0.1 )  = $7.766

B) employment ( L )

$L = \frac{4^5 * K}{W^5}$   =  $L = \frac{1024*120000}{28247.95}$  =  4350 workers

C) Output

Y = 5 ( 120000 )^0.2  *  (7000)^0.8

    = 61777.20

D) Total amount earned by workers

      L * W = 4350 * 7.766

            =  $33782.10