• Explain to your classmate the impact on Target if Walmart raises its minimum wage to $15 per hour, despite the federal minimum wage being fixed at $7.25 per hour.

respond to this person

Why is the demand for labor called a derived demand?

When one provides a service or product this in turn entails the demand for something else. Labor being the primary demand to effectively run andoperate a business. This leads to the reference being called a derived demand as derived is to obtain or acquire something from which in this case workers or laborers would be acquired.

In the labor market, what are the firm's demand curve for labor and workers' supply curve of labor?

The firm's demand curve for labor shows the value of each additional unit of labor representing the higher the pay the less product produced. The workers' supply curve of labor is sloping upward, as wage rates rise the more hours an individual will want to work. (Amacher. 2019, Sect. 12.2)

How is a firm's wage normally determined in the labor market?

A firm's wage is determined based on the quantity produced. As wages increase to a specific amount it tends to cause individuals to produce less. Economists refer to a supply curve with this shape as a backward-bending supply curve. (Amacher. 2019, Sect. 12.2, Supply of Labor)

How could Amazon decide to raise its minimum wage to $15 per hour, despite the federal minimum wage being fixed at $7.25 per hour?

With the federal minimum wage, you must pay an employee no less than that amount per hour. However, there is no ceiling that makes a company unable to pay a per hour rate above that, therefore allowing Amazon to raise their wage to $15 per hour. Long asthey show no discriminatory behavior with the pay offered to employees.

What are positive and negative effects of Amazon raising its minimum wage to $15 per hour on its employees, total revenue, and other companies and their employees?

Amazon raising their minimum wage to $15 per hour provides larger salaries to employees putting them in a better financial position. However, depending on their current position this could also affect them should they be receiving any government assistance or even qualifying for financial aid should they have children going into college. This also may put them in a higher tax bracket and although gross salary may have increased sometimes the net is not worth the end sacrifice. Amazon's total revenue would increase as the increased wage would attract more laborers allowing them to package and deliver at a quicker and more efficient rate. However, the companies' fixed cost would increase affecting their bottom line which they would have to determine at what amount of labor units would production begin to decline resulting in a diminishing bottom line. As for other companies and their employees they would begin losing employees to the higher wage unless the company offers another incentive such as a pension, better health coverage, or even bonuses.