Microeconomics Principles: Effects of Minimum Wage on Labor Market

Running head: MICROECONOMICS PRINCIPLES
Microeconomics Principles
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1MICROECONOMICS PRINCIPLES
Table of Contents
Question 1........................................................................................................................................
Question 2........................................................................................................................................
Question 3........................................................................................................................................
Question 4........................................................................................................................................
Question 5........................................................................................................................................
Question 6........................................................................................................................................
Question 7......................................................................................................................................
Question 8......................................................................................................................................
Question 9......................................................................................................................................
Question 10....................................................................................................................................
Question 11....................................................................................................................................
Question 12....................................................................................................................................
References list................................................................................................................................

2MICROECONOMICS PRINCIPLES
Question 1
Minimum wage refers to the price floor that government of a nation implements to
ensure a minimum payment for the workers. Wages paid below the set minimum limit is
considered as illegal.
A minimum wage is said to be binding when it is set above the equilibrium wage1.
Minimum wage set below the equilibrium wage does not have any impact on the labor
market as workers in such a market are already receiving a higher wage.
Question 2
The national minimum wage per hour in Australia for an adult worker is $18.932.
Question 3
Demand and Supply curve of unskilled labors are given as
D = 1,500,000 – 60,000W
S = 120,000W – 1,200,000
1 Meer, Jonathan, and Jeremy West. "Effects of the minimum wage on employment dynamics." Journal of
Human Resources 51.2 (2016): 500-522.
2 "Welcome To The Fair Work Ombudsman Website." Fair Work Ombudsman. N.p., 2018. Web. 1 Oct. 2018.

3MICROECONOMICS PRINCIPLES
Figure 1: Equilibrium in the labor market
At the equilibrium,
Labor demand=Labor supply
¿ , 1,500,000 – 60,000 W =120,000 W – 1,200,000
¿ , 120,000 W +60,000 W =1,500,000+1,200,000
¿ , 180,000 W =2,700,000
¿ , W ¿=15