Answered: assume that a minimum wage already…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter5: Markets In Motion And Price Controls

Section: Chapter Questions

Problem 6P

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assume that a minimum wage already exists in society. Please explain the effects on the economy of increasing the minimum wage. Be sure to discuss who gains and who loses(Consumer and Producer surplus) as well the inefficiencies that this price floor would create. Make sure you show this graphically as well.

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

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