Question One The supply and demand model is used to analyze decisions and interactions happening in labour markets. The objective of this model is to yield a prediction concerning the level of employment and wages that are likely to prevail in a market. Answer the following questions: 1. What are the two assumptions for this model to hold? 2.When labour economists are evaluating the supply of labour, which two aspects of labour supply should be considered? List the factors of each of the two aspects and explain how they affect labour supply. 3. What are the two determinants of labour demand? Discuss explicitly how they affect a firm's decisions on labour demand. 4. Construct a diagram to describe an equilibrium in a labour market. Clearly label the axises, the curves and the key points in your diagram. 5. Suppose that the government imposes a minimum wage which is higher than the equilibrium wage occurred in Part d), how would the market be affected? Draw a diagram to describe the effects ofthis policy. 6. Based on your understanding about labour demand, suggest a possible strategy that the government could use to try to solve the problem arising in Part e). Show in a diagram how your suggestion would solve this