Problem
Assume that the (daily) demand (measured in hours of work) of unskilled labor in a particular town is given by D(w)=60-w, where w denotes the hourly wage rate. The supply of unskilled labor at the same location is given by S(w)=3w-12
1. Plot the demand and supply curves on the same graph, having wages on the vertical axis and hours of work (that is, labor) on the horizontal axis. Compute the competitive market equilibrium wage for unskilled labor in this town and indicate the equilibrium point on your graph.
2. Explain what would be the effect (if any) of a $20 per hour minimum wage mandate in this market. What happens to the market demand and market supply of labor?
3. Identify who benefits and who loses from the minimum wage mandate and by how much. What can you say about the society as a whole: is it better of worse off (and by how much?) Draw a new graph, if necessary, and mark everything clearly on it.