Q. Now consider the new minimum wage, $15 per hour. Is the new minimum wage bind

Question

Q. Now consider the new minimum wage, $15 per hour. Is the new minimum wage binding? Find theequilibrium wage and quantity. Graph and calculate CS, PS, DWL and unemployment associated with the$15 minimum wage.

For the most part (including drawing graph, plotting each point..etc), I understand it, but what's been bugging me is that the equation for Producer Surplus below:

15 = 30 ? Q/2Q? = 30.
CS = [(30 ? 15)30]/2 = 225

PS = [(12.5 ? 5)30]/2 + (2.5)30 = 187.5

DWL = ?[(2.5)3.33]/2 = ?4.17

Unemployment = 40 ? 30 = 10

My original answer was just:

[(12.5 ? 5)30]/2 = 112.5

Now, my question is how come (2.5 * 30) gets added on to the P.S. equation above? Wouldn't that be considered overlapping though? I'd like to know the thought process behind this.

Any help would be appreciated. Thank you in adcance!

Explanation / Answer

PS is area above supply curve upto the output produced. initially when price is 12.5 , PS= [(12.5 5)30]/2

that is area of triangle above Supply curve and below price line at P= 12.5

but now as minimm price is fixed at P= 15, PS will increase by rectangle whocse height is 2.5 and breadth is 30

therefore PS will increase by 2.5*30

so PS=PS = [(12.5 5)30]/2 + (2.5)30 = 187.5

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