1.Suppose that the market labor supply and labor demand equations are given by Q
ID: 2505679 • Letter: 1
Question
1.Suppose that the market labor supply and labor demand equations are given by Qs = 5W and Qd = 30 - 5W. If a minimum wage is set at $4.00 (W = 4), then:
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2.Consider a market for fish whose market demand and market supply for fish is specified as Qd = 300 - 2.5 P and Qs = - 20 + 1.5 P respectively. The equilibrium price and quantity is
3. Consider a market for fish whose market demand and market supply for fish are specified as Qd = 300 - 2.5 P and Qs = - 20 + 1.5 P respectively. The government decides to impose a price floor of $50 per ton. What would be the resulting market distortion?
4. Consider a market for fish whose market demand and market supply for fish are specified as Qd = 300 - 2.5 P and Qs = - 20 + 1.5 P respectively. The government decides to impose a price ceiling of $50 per ton. The possible black market price after the ceiling is:
Explanation / Answer
1 W=1
Qs = 5 and Qd = 30-5 = 25
W=2
Qs = 5*2 = 10 and Qd = 30-5*2 = 20
W=3
Qs = 5*3 =15 and Qd = 30-5*3 = 15
Q=4
Qs = 5*4 = 20 and Qd = 30-5*4 = 10
2 at equilibrium Qs=Qd
300-2.5P=-20+0.1.5P
4p= 320
P = 80
Q = -20+1.5*80 = 100
3 Qs = -20+1.5*50 = 55
Qd = 300-2.5*50 = 225
since Qd> Qs market will be in inflation
4 black market quantity = Qd-Qs = 225-55 = 170 (as calculated from above)
black money price = 50*170 = 8500
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