Problem
Waiter Tips and Income. Consider a city where the typical waiter has a five-hour shift and daily sales (total bills presented to customers) of $400. The customary tip is 15 percent, so tips add up to $60 per day (15% of $400). The initial wage is $10 per hour, so the typical waiter initially earns $50 in wages paid directly by the restaurant. Suppose a local waiter association runs a successful campaign to get the city s restaurant patrons to increase the average tip from 15 to 20 percent.
a. Use a supply and demand graph with wage (excluding tips) on the vertical axis to show the effects of the new tip rate on the labor market.
b. How will the new tip rate affect the daily income (wages plus tips) of the typical waiter?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.