The equilibrium wage in the fast food industry in US is $10 per hour equilibrium quantity is 1,000,0

The equilibrium wage in the fast food industry in US is $10 per hour equilibrium quantity is 1,000,000 worker hours. This is the Benchmark Equilibrium; call it point E. This is a perfectly competitive market, where the demand and supply curves have regular shape. Please draw the benchmark equilibrium, which should lie at the intersection of the Demand and Supply curve. Suppose because of political action and worker unrest in this industry, government imposes a $18 minimum wage. At the minimum wage, employers want to hire 400,00 worker hours, but workers want to work 1,120,000 worker hours.

a. Show the minimum wage line on Graph 1. Clearly mark point E, the benchmark equilibrium point (E), and the new equilibrium point (call it F), with their co-ordinates. Please indicate the numerical level of unemployment on Graph 1 as well.

Suppose after imposition of the new minimum wage, illegal immigrants enter this specific labor market. Please note that the minimum wage continues to be at $18, where employers want to hire 400,00 worker hours

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b. On Graph 1 show the new equilibrium after illegal immigrants enter this market. Call this new equilibrium M. Can you indicate the new level of unemployment on the graph (no math calculations are necessary)? How does this level of unemployment compare to the unemployment level in part a of this question?

 

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