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Tute_5 - Introductory microeconomics ECON1001 Semester 1...

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Introductory microeconomics ECON1001 Semester 1 2010 Tutorial 5 Week 6 1. ‘Whenever a good or service is good – that is, it is valued by consumers – a government rule that mandates an increase in the quantity traded of the good increases total surplus.’ Assess this statement. 2. Consider minimum or award wages in the labour market. (a) Suppose the award wage in a particular industry is above the equilibrium is above the equilibrium wage in the market for unskilled labour. Using a supply and demand diagram of the market, show the market wage, the number of worker who are employed and the number of workers who are unemployed. Also show the total wage payments to unskilled workers. (b) Now suppose the Australian Fair Pay Commission proposes an increase in the award wage. What effect would this increase have on employment? Does the change in employment demand depend on the elasticity of supply, the elasticity of demand, both elasticities or neither?
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