Sellers the actual cost at any given quantity

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Unformatted text preview: ost at any given quantity increases by $1 and shifts the supply curve to the left. Suppliers are willing to supply 1000 units less at any given price. New demand and supply schedule: Price of good X ($) Quantity of good X Demanded Quantity of good X supplied 11 4000 2000 12 3000 3000 13 2000 4000 14 1000 5000 15 0 6000 Use the following graph to answer question 20: Wage ($ per hour) S 9 8 7 6 5 D 50 100 150 200 250 Labour (hours) Q20. Suppose initially the minimum wage is set at $9 per hour. What will happen to the level of unemployment if the minimum wage is lowered to $6 per hour? a) b) c) d) e) Unemployment of 200 hours will be eliminated Unemployment will decrease by 100 hours Unemployment will increase by 100 hours Unemployment will increase by 200 hours Unemployment level will not be affected Solution: a) Unemployment of 200 hours will be eliminated At $9 per hour, 50 hours of labour are demanded and 250 hours are supplied unemployment = 250 – 50 = 200. The minimum wage of $6 per hour is below the market equilibrium wage of $7 and thus, has no effect on the labour market. At $7 per hour, 150 hou...
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This note was uploaded on 08/26/2010 for the course ECON 208 taught by Professor Dickenson during the Fall '07 term at McGill.

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