Problem
1. Is it possible that a regulation like the minimum wage, which is specifically designed to help low-income people, could actually reduce their income? If so, under what supply and demand conditions might this happen?
2. Low-skilled workers operate in a competitive market. The labor supply is QS = 10W (where W is the price of labor measured by the hourly wage) and the demand for labor is QD = 240 - 20W. Q measures the quantity of labor hired (in thousands of hours)
a. What is the equilibrium wage and quantity of low-skilled labor working in equilibrium?
b. If the government passes a minimum wage of $10 per hour, what will be the new quantity of labor hired? Will there be a shortage or surplus of labor? How large?
c. What is the deadweight loss of this price floor?
d. How much better off are low-skilled workers in this case (in other words, how much does producer surplus change) and how much worse off are employers?
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.