Problem 1 and 2.docx - Pro blem 1 The increase in minimum wage raises the cost of keeping or hiring workers Therefore a higher wage will lower the

Problem 1 and 2.docx - Pro blem 1 The increase in minimum...

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Problem 1The increase in minimum wage raises the cost of keeping or hiring workers. Therefore a higher wage will lower the quantity of labor demanded resulting in unemployment (distance between S curve and D curve at $15 an hr). Firms want to keep their cost down, so they will reduce the amount they spend on labor and lay off workers. The price floor creates a decrease in quantity demanded by employers and an increase in quantity supplied in labor. Quantity demanded (QD) is less than (QS). The binding minimum wage is a price floor above the equilibrium wage (WE). At $15 an hour the number of workers (S) is greater than (D) a result of a surplus of workers known to us as unemployment. Government has created an unintended
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consequence: a smaller demand for workers and a larger supply of workers that are looking for jobs, a distorted market. Problem 2I agree that the price of gas would increase because, of the decrease in supply caused by the attack on the oil fields. Sellers will produce less gas due to the shortage of oil. One less seller
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