Problem 1: The federal minimum wage was last increased from $6.55 to $7.25 per hour. Suppose that the elasticity of labor supply of teenagers is 0.09. Using this estimate, by what percent would you expect teenagers' quantity of labor supplied to change in response to the change in the minimum wage? (For simplicity, assume that all teenage workers receive the minimum wage.) Show your work.
Problem 2: In light of your answer to (a), are there any other effects besides the direct effect on employment that might be of concern when raising the minimum wage? Explain.