The following graph shows the labor market in the fast-food industry in the fict
ID: 1158718 • Letter: T
Question
The following graph shows the labor market in the fast-food industry in the fictional town of Supersize City.
Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
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08016024032040048056064072080020181614121086420WAGE (Dollars per hour)LABOR (Thousands of workers)Demand Supply
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Market for Labor in the Fast Food Industry
Wage
(Dollars per hour)
Labor Demanded
(Thousands of workers)
Labor Supplied
(Thousands of workers)
In this market, the equilibrium hourly wage is, and the equilibrium quantity of labor is thousand workers.
Suppose a senator introduces a bill to legislate a minimum hourly wage of $8. This type of price control is called a .
For each of the wages listed in the following table, determine the quantity of labor demanded, the quantity of labor supplied, and the direction of pressure exerted on wages in the absence of any price controls.
True or False: A minimum wage above $10 per hour is a binding minimum wage in this market.
True
False
Market for Labor in the Fast Food Industry
Wage
(Dollars per hour)
Labor Demanded
(Thousands of workers)
Labor Supplied
(Thousands of workers)
Explanation / Answer
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The graph shows the labor market in the fast-food industry in the fictional town of Supersize City.
If the senator introduces a bill to legislate a minimum hourly wage of $8, then this system will be called a regulated market or a controlled market system. In this system the government is trying to control the market and in doing so it is maintain the price guarantee limits for the commodities being sold here in this case service of the labor.
To understand the below values lets take assumptive figures
Wage
Labor Demanded
Labor Supplied
Pressure on Wages
(Dollars per hour)
(Thousands of workers)
(Thousands of workers)
6
1000
800
200
14
1000
1200
-200
We see in the above scenario that the labor available when demand is 1000 can fluctuate from 800 to 1200 because the labor rate is fluctuating from 6 to 14 as the labor rate will increase the labor supply will increase considering that the demand is constant and other factors remaining the same.
A minimum wage above $10 is a minimum binding wage is true, because anything above the minimum wage will bind the services of labor and will also attract labor even though the demand may be fluctuating but supply would increase.
Wage
Labor Demanded
Labor Supplied
Pressure on Wages
(Dollars per hour)
(Thousands of workers)
(Thousands of workers)
6
1000
800
200
14
1000
1200
-200
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