Peter J Wilcoxen > Five Minute Exercises

Effect of a Minimum Wage (+)

Given:

Employer WTP for hours of work: WTP = 15 -0.01*Q
Employee WTA for hours of work: WTA = 0.005*Q
The minimum wage is $7

Exercise 1

Determine the change in the surplus received by employees as a group.

Answer

Exercise 2

Determine the change in the surplus received by employers as a group.

Answer

Exercise 3

Determine the deadweight loss created by the policy.

Answer

If you get stuck...

Graph of the market

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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 08/17/2016