Suppose the labour market is summarised as: Demand: P = 100 - Q Supply: P =...

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Suppose the labour market is summarised as: Demand: P = 100 - Q Supply: P = Q The government imposes a minimum wage. However, consumers (firms) are unsurprisingly unhappy with the increase in wages and are negotiating with labour unions to return to the equilibrium wage. The union will agree to this if firms offer a lump sum transfer to producers (workers) equivalent to the maximum firms are willing to give, $1189.5. How much was the minimum wage? Suppose the labour market is summarised as: Demand: P = 100 - Q Supply: P = Q The government imposes a minimum wage. However, consumers (firms) are unsurprisingly unhappy with the increase in wages and are negotiating with labour unions to return to the equilibrium wage. The union will agree to this if firms offer a lump sum transfer to producers (workers) equivalent to the maximum firms are willing to give, $1189.5. How much was the minimum wage?

Answer rating: 100% (QA)

To solve this problem we need to find the intersection of the demand and supply curves to obtain the ... View the full answer