Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 28 - Part IX - Unemployment - Problems and Applications - Page 606: 6

Answer

Please see the graph.

Work Step by Step

The original equilibrium quantity of workers supplied and quantity of workers demanded are $L_{S_{0}}$ and $L_{D_{0}}$. The original equilibrium wage was $W_{0}$. The quantity of unemployment is 0 ($L_{S_{0}}$ = $L_{D_{0}}$). The new wage (caused by the increased minimum wage) is $W_{1}$. The new equilibrium quantity of workers supplied and quantity of workers demanded are $L_{S_{1}}$ and $L_{D_{1}}$. The quantity of unemployment is $L_{D_{1}} - L_{S_{1}}$. Unemployment increases from zero to $L_{D_{1}} - L_{S_{1}}$. The wage increases from $W_{0}$ to $W_{1}$, the quantity of workers demanded decreases, and the quantity of workers supplied increases.
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