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Suppose You Have Estimated the Supply Curve for the Local

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Essay

Suppose you have estimated the supply curve for the local labor market as Qs = W - 5, where W is the hourly wage and Qs is the quantity of workers willing to work at each wage. You have estimated the demand curve for the local labor market as Qd, = 25 - W, where W is the hourly wage and Qd is the quantity of workers demanded by employers at each wage.
a. Solve for the equilibrium wage and quantity of labor.
b. If the government imposes a minimum wage of $18, what are the size of the labor force, the number of unemployed workers, and the unemployment rate?


Definitions:

Crude Oil

A naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials.

Gasoline Production

The process of refining crude oil and blending various components to create gasoline, a major fuel used in internal combustion engines.

Supply Curve

A graphical representation showing the relationship between the price of a good or service and the quantity of that good or service that suppliers are willing and able to provide at each price level.

Auto Assembly

The process of putting together various components of automobiles in a factory setting, an essential part of the automotive manufacturing industry.

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