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Suppose that the market for unskilled labour is a competitive market and can be described by the following demand and supply curves: ?? = 60,000 – 5,000?? ?? = 5,000?? – 35,000 ?? is wage rate per...

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Suppose that the market for unskilled labour is a competitive market and can be described by the following demand and supply curves: ?? = 60,000 – 5,000?? ?? = 5,000?? – 35,000 ?? is wage rate per hour for labour; ?? and ?? are demand and supply for unskilled labour, both measured in hours. Answer the following questions. Present your working and reasoning where needed. Answers without working or reasoning will result in loss of marks. Q1. [4 marks] Calculate the equilibrium wage rate and quantity of labour employed and draw a diagram to illustrate your answer. Q2. [4 marks] Show on the same diagram and calculate the size of the: a) Consumer/firm surplus b) Producer/worker surplus c) Total Surplus Q3. [4 marks] Suppose that the government imposes a minimum wage of $11.00 per hour. a) Show the minimum wage on the same diagram. b) How many hours of labour are now employed? Show this on the same diagram. c) Calculate the amount of the surplus or shortage of labour created by the imposition of the minimum wage. Show this on the same diagram. Q4. [5 marks] Following the introduction of the minimum wage $11.00 per hour, show on the same diagram and calculate the size of: a) consumer/firm surplus b) producer/worker surplus c) total surplus d) resources lost in job search e) deadweight loss Q5. [3 marks] Following the introduction of the minimum wage, explain whether: a) Firms are better off? b) Workers are better off? c) Society is better off? [Maximum 100 words]
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ECON111 MICROECONOMIC PRINCIPLES S2 2017 INDIVIDUAL ASSIGNMENT Total Marks 80 – Weighting: 20% PURPOSE The Individual Assignment relates to the following Learning Outcomes: • Recognise and communicate the importance of microeconomics in the Australian and global economies • Knowledge and understanding: Recognise how principles of microeconomics are relevant in understanding decision-making by individuals, business and government • Problem solving: Apply theoretical understanding of microeconomics to real life economic problems • Ethics: Demonstrate ability to evaluate economic theory and real world applications in the context of equity considerations These learning outcomes support development of the following Graduate Capabilities: • Engaged and Ethical Local and Global citizens • Discipline Specific Knowledge and Skills • Problem Solving and Research Capability • Effective Communication SUBMISSION • The assignment must be submitted via Turnitin by 4pm on Friday October 6. The submission link is available on iLearn under the assignment tab from 4pm on Friday September 29. • No extensions will be granted except in cases where an application for ‘Disruptions to Study’ has been approved. • Late submission will incur a penalty of 10% per day of total available marks. • Submissions will not be accepted beyond 96 hours past submission deadline. PLAGIARISM • Avoid plagiarism. The consequence of plagiarism is zero mark. • You may work with other students at the preparatory stage. However, the final version of the assignment should be written in your own words. • Note that Turnitin will compare your submission against others’ as well as internet sources. • Get familiarised with the academic honesty policy: https://staff.mq.edu.au/work/strategy-planning-and-governance/university-policies- and-procedures/policies/academic-honesty Page 1 of 6ECON111 MICROECONOMIC PRINCIPLES S2 2017 DOCUMENT PREPARATION CHECKLIST ? All...

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Answered Same Day Dec 27, 2021

Solution

Robert answered on Dec 27 2021
121 Votes
PART 1 (32 MARKS)
Suppose that the market for unskilled labour is a competitive market and can be described
y the following demand and supply curves:
? = 60,000 – 5,000?
? = 5,000? – 35,000
? is wage rate per hour for labour; ? and ? are demand and supply for unskilled labour,
oth measured in hours.
Answer the following questions. Present your working and reasoning where needed.
Answers without working or reasoning will result in loss of marks.
Q1. [4 marks] Calculate the equili
ium wage rate and quantity of labour employed and
draw a diagram to illustrate your answer.
?
? ?
?
?
?
?
? ?
? ?
?
?
? ?
Q2. [4 marks] Show on the same diagram and calculate the size of the:
a) Consume
firm surplus
) Produce
worker surplus
c) Total Surplus
a) Consumer surplus= the area of the red shaded triangle
= 0.5*(12- 9.5) * 12500
= 15625
) Producer surplus = the area of green shaded triangle
= 0.5*(9.5-7) *12500
=15625
c) Total surplus = 15625+15625= 31250
Q3. [4 marks] Suppose that the government imposes a minimum wage of $11.00 per hour.
a) Show the minimum wage on the same diagram.
) How many hours of labour are now employed? Show this on the same diagram.
c) Calculate the amount of the surplus or shortage of labour created by the imposition
of the minimum wage. Show this on the same diagram.
a)


) D = 60,000 5,000W
D= 60000-5000*11
=60000-55000
=5000
S = 5,000W 35,000
=5000*11-35000
=20000
c) Surplus = 20000-5000=15000

The surplus is created du to minimum wage as shown in the above diagram.
Q4. [5 marks] Following the introduction of the minimum wage $11.00 per hour, show on
the same diagram and calculate the size of:
a) consume
firm surplus
CS= 0.5*( 12-10) *5000
=5000
) produce
worker surplus
(11-8)*5000+0.5*(8-7)*5000
=17500
c) total surplus
Total surplus= CS+PS
=5000+17500
=22500
d) resources lost in job search
=0.5*(11-9.5)*12500
=9375
e) deadweight loss
5000 = 5,000W – 35,000
40000=5000w
W=8
DWL= 0.5* (11-8) *(12500-5000)
=11250
Q5. [3 marks] Following the introduction of the minimum wage, explain whether:
a) Firms are better off?
No firms are worse off as they have to pay more wage bill than before.
) Workers are better off?
Workers are better off even though total wage decreases. Due to higher minimum wage, workers
prefer job rather than remain unemployed. Those who are working will prefer to work fewer hours.
c) Society is better off? [Maximum 100 words]
Minimum wage creates unemployment in the society. Some workers are better off as they are now
paid more but their benefit is balanced by the loss of their producers. There are some workers who
are actually willing to work below $11.00 and for which so firms are willing to pay them more than
$11.00 per hr. So overall those jobs are gone as well as the goods and services produced are also
gone. So society as a whole are made worse off.
ECON111 MICROECONOMIC PRINCIPLES S2 2017
Page 4 of 6
Q6. [8 marks] Now assume that the resources lost in job search calculated in Q4 are actually
transfe
ed from consumers (firms) to producers (workers). In other words, now assume
that no resources at all are lost in job search activity. Re-calculate the following:
a) consumer surplus
CS= 0.5*( 12-10) *5000
=5000
) producer surplus
(11-8)*5000+0.5*(8-7)*5000+9375
=17500+9375
=26875
c) total surplus
CS+PS
=5000+26875
=31875
d) deadweight loss.
DWL= 0.5*(9.5-8)*12500
=9375
Based on your calculations do your conclusions in Q5 change?
Q7. [2 marks] Consider your responses in Q5 and Q6. From a consequentialist perspective
that has as its objective allocative efficiency, is the introduction of a minimum wage ethically
justified? Explain. [Maximum 100 words]
From Q5 and Q6 it has been observed that minimum wage creates deadweight loss to the society.
Labor market will not be allocative efficient with minimum wage. Minimum wage creates
unemployment in the market. Increasing unemployment is not desirable in any society. Some
economists argue that minimum wage can only be ethically justified if the employer has the
monopsony setting power. If the labour market is approximated...
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