Chapter 4: Q. 4.3 (page 75)
Understand the rationing function of prices
To adjust the mismatch in demand and supply by the change in prices.
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How might California cities alternatively have developed a rationing-by-queues approach using the internet?
Consider the diagram below,which depicts the labor
market inacity that has adopteda"living wage law"
requiring employers to payaminimum wage rate of
\(11 per hour.Answer the questions that follow.
a.What condition exists in this city's labor market
at the present minimum wage of\)11 per hour?
How many people are unemployed at this wage?
b.Acity councilwoman has proposed amending
the living wage law.She suggests reducing the
minimum wage to\(9per hour.Assuming that
the labor demand and supply curves were to
remain in their present positions,how many
people would be unemployed atanew\)9
minimum wage?
c.Acouncilman has offeredacounterproposal.In
his view,the current minimum wage is too low
and should be increased to\(12 per hour.
Assuming that the labor demand and supply
curves remain in their present positions,how
many people would be unemployed atanew\)12
minimum wage?
Why might transaction costs of locating a replacement clothing item increase with the number of particular features that characterize that item?
Other things being equal, is the price of milk in Europe likely to rise or fall in response to the elimination of milk production quotas? Explain your answer.
Consider Figure 4-1.The current demand and
supply curves are D₁ and S₁,at which the equilib
rium price and quantity areP,and Q₁.If firms
adopt an improved technique for producing this
good,which curve shifts,and in which direction
does it shift?What happens to the market clearing
price and to the equilibrium quantity?
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