hW#4 - Homework Assignment # 4 1. Minimum Wage Analysis a....

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Homework Assignment # 4 1. Minimum Wage Analysis a. Price Floor b. Price floor on labor refers to the situation that minimum wage is above the equilibrium wage. It will benefit successful employees but will create persistent surplus, or unemployment. Because the minimum wage is maintained above the equilibrium wage, the quantity demanded for labor is decreased and the quantity supplied for labor is increased compared to the equilibrium quantity for labor. This leads to inefficiencies in the form of deadweight loss from inefficiently low quantity, inefficient allocation of employment opportunities among people who need a job, wasted labor resources and inefficiently high labor quality. (See graph) 2. a. $ 6 b. $ 4 c. $ 7 d. $ 1 e. $ 3 f. When the price elasticity of demand is high and the price elasticity of supply is low, the burden of an excise tax falls mainly on producers. g. This tax results in decrease in consumer and producer surplus, and leads to the deadweight loss.
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This note was uploaded on 01/25/2012 for the course AS 195.603 taught by Professor C.b. during the Fall '11 term at Johns Hopkins.

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hW#4 - Homework Assignment # 4 1. Minimum Wage Analysis a....

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