ECON 101 2Midtermreview

ECON 101 2Midtermreview

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Unformatted text preview: ge Brings Unemployment Ø། The quantity of labour supplied exceeds the quantity demanded and unemployment is created. Ø། With only 20 million hours demanded, some workers are willing to supply the last hour demanded for $8. Inefficiency of a Minimum Wage Ø། A minimum wage leads to an inefficient outcome. Ø། The quantity of labour employed is less than the efficient quantity. Ø། The supply of labour measures the marginal social cost of labour to workers (leisure forgone). Ø། The demand for labour measures the marginal social benefit from labour (value of goods produced). Figure 6.4 illustrates this inefficient outcome. Ø། A minimum wage set above the equilibrium wage decreases the quantity of labour employed. Ø། A deadweight loss arises. Ø། The potential loss from increased job search decreases both workers’ surplus and firms’ surplus. Ø། The full loss is the sum of the red...
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This note was uploaded on 03/29/2014 for the course ECON 101 taught by Professor Vanderwaal during the Spring '08 term at Waterloo.

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