Explain whether the following statements are true, false, or uncertain. Use grap

Question

Explain whether the following statements are true, false, or uncertain. Use graphs and/or equations to support your arguments.

(a) Raising the minimum wage will benefit all workers.

(b) If Senator Cruz buys one pint of milk regardless of its price and $1 worth of cookies every day, then his demand curve for milk and his demand curve for cookies are both price inelastic. (c) A minimum wage leads to relatively less deadweight loss in labor markets where labor demand is relatively more inelastic.

(d) Governor Palin notices that, on average, wages are much higher in Alaska than Arizona. Thus, she concludes, everyone in Arizona could raise their incomes by moving to Alaska.

(e) Raising the minimum wage always increases the total payments from firms to workers. (Total payments from firms to workers equal the wage times the quantity of labor exchanged in the market = w × L.)

Explanation / Answer

a) Increasing minimum wage of low paid workers would increase their income and they will move above poverty threshold whereas some jobs for low wage workers would get eliminated and the share of low wage workers would fall slightly. Hence, raising minimum wages will not benefit all workers

the correct option is False

b) When demand for a good does not change with respect to price as it is a necessity good even if the price for that good rises then one can say that demand for that good is price inelastic.

the correct option is True

c) Tax incidence and elasticity are inversely related. If a good is demand inelastic then it would result in higher deadweight loss compared to the elastic demand for that good. A minimum wage would incur less deadweight loss if demand is elastic

the correct option is False

d) On average, if wages are much higher in Alaska then everyone could raise income by migrating but when labor supply would increase as people migrate then it would put pressure on wages to fall and equal the demand and lead to unemployment or each getting low wages.

the correct option is False

e) Raising minimum wage does not always increase total payment to workers as it is regulated by the government so some amount goes to the government and some leads to deadweight loss as the market is below a competitive level of output.

the correct option is False

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