Comparative Statics

question 14

Essay

Comparative Statics. Demand and supply conditions in the market for unskilled labor are important concerns to business and government decision makers. Consider the case of a federally mandated minimum wage set above the equilibrium or market clearing wage level. Some of the following factors have the potential to influence the demand or quantity demanded of unskilled labor. Influences on the supply or quantity supplied may also result. Holding all else equal, describe these influences as increasing or decreasing, and indicate the direction of the resulting movement along or shift in the relevant curve(s).
A. An increase in the popularity of self-service gas stations, car washes, and so on.
B. A fall in welfare benefits
C. An increase in the minimum wage
D. A rise in interest rates
E. A decrease in the quality of secondary education

---

Definitions:

Conservatism

A principle in accounting that recommends erring on the side of caution and underestimating rather than overestimating profits and values.

New Evidence

Recent information or data that offering fresh insights, usually changing or confirming existing understandings.

Behavioral Finance

A field of finance that proposes psychology-based theories to explain stock market anomalies and investing behaviors.

Security Prices

The cost at which securities, such as stocks or bonds, are bought and sold in the market, determined by supply and demand dynamics.