曼昆經(jīng)濟學(xué) 宏觀經(jīng)濟學(xué) 第五 教師參考手冊 chap

66SUPPLY,DEMAND,ANDGOVERNMENTPOLICIESSUPPLY,DEMAND,ANDGOVERNMENTPOLICIESWHAT’SNEW:AnewIntheNewsboxhasbeenaddedon“DoesaDroughtNeedtocauseaWaterShortage?”TheIntheNewsboxon“RentControlinNewYorkCity”hasbeenupdatedwithanewarticle.LEARNINGOBJECTIVES:Bytheendofthischapter,studentsshouldunderstand:theeffectsofgovernmentpoliciesthatplaceaceilingonprices.theeffectsofgovernmentpoliciesthatputafloorunderprices.howataxonagoodaffectsthepriceofthegoodandthequantitysold.thattaxesleviedonbuyersandtaxesleviedonsellersareequivalent.howtheburdenofataxissplitbetweenbuyersandsellers.KEYPOINTS:Apriceceilingisalegalmaximumonthepriceofagoodorservice.Anexampleisrentcontrol.Ifthepriceceilingisbelowtheequilibriumprice,thequantitydemandedexceedsthequantitysupplied.Becauseoftheresultingshortage,sellersmustinsomewayrationthegoodorserviceamongbuyers.Apricefloorisalegalminimumonthepriceofagoodorservice.Anexampleistheminimumwage.Ifthepricefloorisabovetheequilibriumprice,thequantitysuppliedexceedsthequantitydemanded.Becauseoftheresultingsurplus,buyers’demandsforthegoodorservicemustinsomewayberationedamongsellers.Whenthegovernmentleviesataxonagood,theequilibriumquantityofthegoodfalls.Thatis,ataxshrinksthesizeofthemarket.Ataxonagoodplacesawedgebetweenthepricepaidbybuyersandthepricereceivedbysellers.Whenthemarketmovestothenewequilibrium,buyerspaymoreforthegoodandsellersreceivelessforit.Inthissense,buyersandsellerssharethetaxburden.theincidenceofataxdoesnotdependonwhetherthetaxisleviedonbuyersorsellers.Theincidenceofataxdependsonthepriceelasticitiesofsupplyanddemand.Theburdentendstofallonthesideofthemarketthatislesselasticbecausethatsideofthemarketcanrespondlesseasilytothetaxbychangingthequantityboughtorsold.CHAPTEROUTLINE:I. ControlsonPricesA. DefinitionofPriceCeiling:alegalmaximumonthepriceatwhichagoodcanbesold.B. DefinitionofPriceFloor:alegalminimumonthepriceatwhichagoodcanbesold.C. HowPriceCeilingsAffectMarketOutcomesFigure6-1Figure6-11. Therearetwopossibleoutcomesifapriceceilingisputintoplaceinamarket.a. Ifthepriceceilingishigherthanorequaltotheequilibriumprice,itisnotbinding.b. Ifthepriceceilingislowerthantheequilibriumprice,theceilingisabindingconstraintandashortageiscreated.PricePriceSupplySupplyPriceCeilingPriceCeilingShortageShortageDemandDemandQuantityDemandedQuantitySuppliedQuantityDemandedQuantitySuppliedQuantity2. Ifashortageforaproductoccurs(andpricecannotadjusttoeliminateit),amethodforrationingthegoodmustdevelop.3. CaseStudy:LinesattheGasPumpFigure6-2Figure6-2a. In1973,OPECraisedthepriceofcrudeoilwhichledtoareductioninthesupplyofgasoline.b. Thefederalgovernmentputpriceceilingsintoplaceandthiscreatedlargeshortages.c. Motoristswereforcedtospendlargeamountsoftimeinlineatthegaspump(whichishowthegaswasrationed).ALTERNATIVECLASSROOMEXAMPLE:Askstudentsabouttherentalmarketintheirtown.Drawasupply-and-demandgraphfortwobedroomapartmentsaskingstudentswhattheybelievetheequilibriumrentalrateis.Thensuggestthatthecitycouncilisaccusinglandlordsoftakingadvantageofstudentsandthusplacesapriceceilingbelowtheequilibriumprice.Makesurethatstudentscanseethatashortageofapartmentswouldresult.Askstudentstoidentifythewinnersandlosersofthisgovernmentpolicy.ALTERNATIVECLASSROOMEXAMPLE:Askstudentsabouttherentalmarketintheirtown.Drawasupply-and-demandgraphfortwobedroomapartmentsaskingstudentswhattheybelievetheequilibriumrentalrateis.Thensuggestthatthecitycouncilisaccusinglandlordsoftakingadvantageofstudentsandthusplacesapriceceilingbelowtheequilibriumprice.Makesurethatstudentscanseethatashortageofapartmentswouldresult.Askstudentstoidentifythewinnersandlosersofthisgovernmentpolicy. 4. IntheNews:DoesaDroughtNeedtoCauseaWaterShortage?a. Duringthesummerof1999,theEastCoastoftheU.S.experiencedashortageofwater. b. ThisisanarticlefromtheWallStreetJournalsuggestingaway inwhichtheshortagecouldhavebeenavoided.5. CaseStudy:RentControlintheShortRunandtheLongRunFigure6-3Figure6-3a. Thegoalofrentcontrolistomakehousingmoreaffordableforthepoor.b. Sincethesupplyofapartmentsisfixed(perfectlyinelastic)intheshortrunandupward-sloping(elastic)inthelongrun,theshortageismuchlargerinthelongrunthanintheshortrun.c. Rentcontrolledapartmentsarerationedinanumberofwaysincludinglongwaitinglists,discriminationagainstminoritiesandfamilieswithchildren,andevenunder-the-tablepaymentstolandlords.d. Thequalityofapartmentsalsosuffersduetorentcontrol. 6. IntheNews:RentControlinNewYorkCitya. Rentcontrolisapolicythathasfewsupporters(otherthanthoselivinginarentcontrolledapartment).b. ThisisanarticlefromTheNewYorkTimesdescribingthepossibilityoftheendofrentcontrolinNewYorkCity.D. HowPriceFloorsAffectMarketOutcomesFigure6-4Figure6-41. Therearetwopossibleoutcomesifapricefloorisputintoplaceinamarket.a. Ifthepricefloorislowerthanorequaltotheequilibriumprice,itisnotbinding.b. Ifthepricefloorishigherthantheequilibriumprice,thefloorisabindingconstraintandasurplusiscreated.PricePriceSupplySupplySurplusSurplusPriceFloorPriceFloorDemandDemandQuantitySuppliedQuantityDemandedQuantitySuppliedQuantityDemandedQuantityALTERNATIVECLASSROOMEXAMPLE:ALTERNATIVECLASSROOMEXAMPLE:Gothroughanexamplewithanagriculturalpricesupport.Showstudentsthat,eventhoughapricesupportisnotalegalminimumprice,itsresultisexactlythesameasapricefloor.Makesurethatstudentscanseethatasurpluswillresult.Askstudentstoidentifythewinnersandlosersofthisgovernmentpolicy.Pointoutthecostsoftheprogram(purchasingthesurplusandstoringit).2. CaseStudy:TheMinimumWageFigure6-5Figure6-5a. Themarketforlaborlookslikeanyothermarket:downward-slopingdemand,upward-slopingsupply,equilibriumprice(calledawage),andequilibriumquantityoflaborhired.b. Iftheminimumwageisabovetheequilibriumwageinthelabormarket,asurplusoflaborwilldevelop(unemployment).c. Theminimumwagewillbeabindingconstraintonlyinmarketswhereequilibriumwagesarelow.d. Thus,theminimumwagewillhaveitsgreatestimpactonthemarketforteenagersandotherunskilledworkers.E. EvaluatingPriceControlsThisisagoodchancetoreinforcetheprinciple“Marketsareusuallyagoodwaytoorganizeeconomicactivity.”1. Becausemosteconomistsfeelthatmarketsareusuallyagoodwaytoorganizeeconomicactivity,mostopposetheuseofpriceceilingsandfloors.Thisisagoodchancetoreinforcetheprinciple“Marketsareusuallyagoodwaytoorganizeeconomicactivity.”2. Priceceilingsandpricefloorsoftenhurtthepeopletheyareintendedtohelp.a. Rentcontrolscreateashortageofqualityhousingandprovidedisincentivesforbuildingmaintenance.b. Minimumwagelawscreatehigherratesofunemploymentforteenageandlowskilledworkers.Bepreparedtoanswerthequestion,“Ifpricecontrolshavesuchadverseconsequences,whyaretheyimposed?”Youmaywanttopointoutthat,sometimes,economicignoranceleadstounintendedoutcomes.Youmayalsowanttopointoutthateconomicanalysisservesasonlyaguidetopolicymakers.Theymaychoosetoignoreitwhenformingpolicy.Inaddition,itisofteninterestingtoencouragethestudentstothinkaboutthedistributionaleffectsofrentcontrol.Bepreparedtoanswerthequestion,“Ifpricecontrolshavesuchadverseconsequences,whyaretheyimposed?”Youmaywanttopointoutthat,sometimes,economicignoranceleadstounintendedoutcomes.Youmayalsowanttopointoutthateconomicanalysisservesasonlyaguidetopolicymakers.Theymaychoosetoignoreitwhenformingpolicy.Inaddition,itisofteninterestingtoencouragethestudentstothinkaboutthedistributionaleffectsofrentcontrol.II. TaxesA. DefinitionofTaxIncidence:thestudyofwhobearstheburdenoftaxation.B. HowTaxesonBuyersAffectMarketOutcomesUsethischancetoreinforcethethreestepslearnedinChapter4.Studentsshoulddecidewhetherthistaxlawaffectsthedemandcurveorthesupplycurve,decidewhichwayitshifts,andthenexaminehowtheshiftaffectsequilibriumpriceandquantity.UsethischancetoreinforcethethreestepslearnedinChapter4.Studentsshoulddecidewhetherthistaxlawaffectsthedemandcurveorthesupplycurve,decidewhichwayitshifts,andthenexaminehowtheshiftaffectsequilibriumpriceandquantity.Ifthegovernmentrequiresthebuyertopayacertaindollaramountforeachunitofagoodpurchased,thiswillcauseadecreaseindemand.Examplesofunittaxesincludemostgovernmentexcisetaxesonproductssuchasgasoline,alcohol,andtobacco.Figure6-6Examplesofunittaxesincludemostgovernmentexcisetaxesonproductssuchasgasoline,alcohol,andtobacco.Figure6-62. Thedemandcurvewillshiftdownbytheamountofthetax.Youwillwanttobeverycarefulwhendiscussingthe“downward”shiftofthedemandcurvegiventhatweencouragestudentstothinkofsupplyanddemandcurvesshifting“right”and“l(fā)eft.”Youwillwanttobeverycarefulwhendiscussingthe“downward”shiftofthedemandcurvegiventhatweencouragestudentstothinkofsupplyanddemandcurvesshifting“right”and“l(fā)eft.”SupplyPriceSupplyPricePbuyersPbuyersTaxPTaxPwithouttaxPPsellersDD1DD2QuantityQuantity3. Thequantityofthegoodsoldwilldecline.4. Buyersandsellerswillsharetheburdenofthetax-buyerspaymoreforthegood(includingthetax)andsellersreceiveless.C. HowTaxesonSellersAffectMarketOutcomesFigure6-7Figure6-71. Ifthegovernmentrequiresthesellertopayacertaindollaramountforeachunitofagoodpurchased,thiswillcauseadecreaseinsupply.2. Thesupplycurvewillshiftupbytheamountofthetax.3. Thequantityofthegoodsoldwilldecline.Buyersandsellerswillsharetheburdenofthetax-buyerspaymoreforthegoodandsellersreceiveless(becauseofthetax).Again,beverycarefulwhendiscussingthe“upward”shiftofthesupplycurve.Studentsoftenmistakenlybelievethatthismeansthatsupplyisincreasing.Pointouttheincreaseinthecostofsellingthegood.Ifstudentsunderstandthatanincreaseincostleadstoadecreaseinsupply,theywillbelesslikelytobecomeconfused.Again,beverycarefulwhendiscussingthe“upward”shiftofthesupplycurve.Studentsoftenmistakenlybelievethatthismeansthatsupplyisincreasing.Pointouttheincreaseinthecostofsellingthegood.Ifstudentsunderstandthatanincreaseincostleadstoadecreaseinsupply,theywillbelesslikelytobecomeconfused.S2PriceS2PriceS1S1PbuyersPbuyersTaxPTaxPwithouttaxPPsellersDemandDemandQuantityQuantityStressthattheoutcomeofataxleviedonsellersisexactlythesameastheoutcomeofataxleviedonbuyers.Whendrawingthisinclass,makesurethatthepricethatbuyersenduppayingandthepricethatsellersendupreceivingisthesameinbothexamples.Stressthattheoutcomeofataxleviedonsellersisexactlythesameastheoutcomeofataxleviedonbuyers.Whendrawingthisinclass,makesurethatthepricethatbuyersenduppayingandthepricethatsellersendupreceivingisthesameinbothexamples.D. CaseStudy:CanCongressDistributetheBurdenofaPayrollTax?Figure6-8Figure6-81. FICA(SocialSecurity)taxesweredesignedsothatfirmsandworkerswouldexactlysharetheburdenofthetax.2. Thistypeofpayrolltaxwillsimplyputawedgebetweenthewagethefirmpaysandthewagetheworkerswillreceive.3. Itistruethatfirmsandworkerssharetheburdenofthistax,butitisnotnecessarily50-50.Gothroughthismaterialslowly.Makesurethatstudentscanseehowtofindtheburdenofthetaxpaidbyconsumersandtheburdenofthetaxpaidbyproducersbeforediscussingtheeffectsofelasticityontaxincidence.Ifyourushthroughthismaterial,youwilllosethem.Gothroughthismaterialslowly.Makesurethatstudentscanseehowtofindtheburdenofthetaxpaidbyconsumersandtheburdenofthetaxpaidbyproducersbeforediscussingtheeffectsofelasticityontaxincidence.Ifyourushthroughthismaterial,youwilllosethem.E. ElasticityandTaxIncidence1. Whensupplyiselasticanddemandisinelastic,thelargestshareofthetaxburdenfallsonconsumers.2. Whensupplyisinelasticanddemandiselastic,thelargestshareofthetaxburdenfallsonproducers.Ingeneral,ataxburdenfallsmoreheavilyonthesideofthemarketthatislesselastic.Figure6-9Figure6-9PricePricePricePriceInelasticSupplyInelasticSupplyElasticSupplyElasticSupplyPPbuyersPbuyersPbuyersPwithouttaxPPwithouttaxPwithouttaxPPsellersElasticDemandElasticDemandInelasticDemandInelasticDemandPPsellersQuantityQuantityQuantityQuantity4. CaseStudy:WhoPaystheLuxuryTax?a. In1990,Congressadoptedanewluxurytax.b. Becausethedemandforluxuriesisoftenrelativelymoreelasticthansupply,theburdenofthetaxfellonproducersandtheirworkers.ADJUNCTTEACHINGTIPSANDWARM-UPACTIVITIES:Thisisanexcellentchaptertobringtogethermanyoftheconceptsdevelopedearlier.Whenconstructingthegraphstoillustratetheeffectsofpricecontrolsandtheincidenceofatax,besuretomakeyourgraphsclear,accuratethefirsttime,andlarge.Beforecoveringpricecontrols,askforashowofhandstofindouthowmanyofyourstudentscurrentlyworkforminimumwage.Thenaskhowmanyhaveeverworkedforminimumwage.Askthemtoguesswhattheyearlyincomeisforaminimumwageearnerworkingfulltime.Usethisasastartingpointtodiscusstheissuesthatpolicymakersoftentrytoaddress.Askstudentswhethertheythinkthattheminimumwageshouldberaisedorlowered.Besuretoreturntothisdiscussionafteryouhavediscussedtheeffectsofpricefloors.Findouthowmanystudentspredictedcorrectly.SOLUTIONSTOTEXTPROBLEMS:QuickQuizzes1. Apriceceilingisalegalmaximumonthepriceatwhichagoodcanbesold.Examplesofpriceceilingsincluderentcontrol,pricecontrolsongasolineinthe1970s,andpriceceilingsonwaterduringadrought.Apricefloorisalegalminimumonthepriceatwhichagoodcanbesold.Examplesofpricefloorsincludetheminimumwageandfarm-supportprices.Apriceceilingleadstoashortage,iftheceilingisbinding,becausesupplierswon’tproduceenoughgoodstomeetdemandunlessthepriceisallowedtoriseabovetheceiling.Apricefloorleadstoasurplus,ifthefloorisbinding,becausesuppliersproducemoregoodsthanaredemandedunlessthepriceisallowedtofallbelowthefloor.2. Withnotax,asshowninFigure6-1,thedemandcurveisD1andthesupplycurveisS.TheequilibriumpriceisP1andtheequilibriumquantityisQ1.Ifthetaxisimposedoncarbuyers,thedemandcurveshiftsdownbytheamountofthetax($1000)toD2.ThedownwardshiftinthedemandcurveleadstoadeclineintheequilibriumpricetoP2(theamountreceivedbysellersfrombuyers)andadeclineintheequilibriumquantitytoQ2.ThepricereceivedbysellersdeclinesbyP1-P2,showninthefigureasPS.BuyerspayatotalofP2+$1,000,anincreaseinwhattheypayofP2+$1,000-P1,showninthefigureasPB.Figure6-1 Ifthetaxisimposedoncarsellers,asshowninFigure6-2,thesupplycurveshiftsupbytheamountofthetax($1000)toS2.TheupwardshiftinthesupplycurveleadstoariseintheequilibriumpricetoP2(theamountreceivedbysellersfrombuyers)andadeclineintheequilibriumquantitytoQ2.ThepricepaidbybuyersdeclinesbyP1-P2,showninthefigureasPB.SellersreceiveP2andpaytaxesof$1,000,receivingonnetP2-$1,000,adecreaseinwhattheyreceivebyP1-(P2-$1,000),showninthefigureasPS.Figure6-2QuestionsforReview1. AnexampleofapriceceilingistherentcontrolsysteminNewYorkCity.Anexampleofapriceflooristheminimumwage.Manyotherexamplesarepossible.2. Ashortageofagoodariseswhenthereisabindingpriceceiling.Asurplusofagoodariseswhenthereisabindingpricefloor.3. Whenthepriceofagoodisnotallowedtobringsupplyanddemandintoequilibrium,somealternativemechanismmustallocateresources.Ifsupplyexceedsdemand,sothatthere’sasurplusofagoodasinthecaseofabindingpricefloor,sellersmaytrytoappealtothepersonalbiasesofthebuyers.Ifdemandexceedssupply,sothatthere’sashortageofagoodasinthecaseofabindingpriceceiling,sellerscanrationthegoodaccordingtotheirpersonalbiases,ormakebuyerswaitinline.4. Economistsusuallyopposecontrolsonpricesbecausepriceshavethecrucialjobofcoordinatingeconomicactivitybybalancingdemandandsupply.Whenpolicymakerssetcontrolsonprices,theyobscurethesignalsthatguidetheallocationofsociety’sresources.Further,pricecontrolsoftenhurtthosetheyaretryingtohelp.5. Ataxpaidbybuyersshiftsthedemandcurve,whileataxpaidbysellersshiftsthesupplycurve.However,theoutcomeisthesameregardlessofwhopaysthetax.6. Ataxonagoodraisesthepricebuyerspay,lowersthepricesellersreceive,andreducesthequantitysold.7. Theburdenofataxisdividedbetweenbuyersandsellersdependingontheelasticityofdemandandsupply.Elasticityrepresentsthewillingnessofbuyersorsellerstoleavethemarket,whichinturnsdependsontheiralternatives.Whenagoodistaxed,thesideofthemarketwithfewergoodalternativescannoteasilyleavethemarketandthusbearsmoreoftheburdenofthetax.ProblemsandApplications1. Ifthepriceceilingof$40perticketisbelowtheequilibriumprice,thenquantitydemandedexceedsquantitysupplied,sothere’sashortageoftickets.Thepolicydecreasesthenumberofpeoplewhoattendclassicalmusicconcerts,sincesupplyislowerbecauseofthelowerprice.2. a. TheimpositionofabindingpricefloorinthecheesemarketisshowninFigure6-3.Intheabsenceofthepricefloor,thepricewouldbeP1andthequantitywouldbeQ1.WiththefloorsetatPf,whichisgreaterthanP1,thequantitydemandedisQ2,whilequantitysuppliedisQ3,sothereisasurplusofcheeseintheamountQ3-Q2.b. Thefarmers’complaintthattheirtotalrevenuehasdeclinediscorrectifdemandiselastic.Withelasticdemand,thepercentagedeclineinquantitywouldexceedthepercentageriseinprice,sototalrevenuewoulddecline.c. Ifthegovernmentpurchasesallthesurpluscheeseatthepricefloor,producersbenefitandtaxpayerslose.ProducerswouldproducequantityQ3ofcheese,andtheirtotalrevenuewouldincreasesubstantially.ButconsumerswouldbuyonlyquantityQ2ofcheese,sotheyareinthesamepositionasbefore.Taxpayerslosebecausetheywouldbefinancingthepurchaseofthesurpluscheesethroughhighertaxes.Figure6-33. a. Theequilibriumpriceoffrisbeesis$8andtheequilibriumquantityis6millionfrisbees.b. Withapricefloorof$10,thenewmarketpriceis$10sincethepricefloorisbinding.Atthatprice,only2millionfrisbeesaresold,sincethat’sthequantitydemanded.c. Ifthere’sapriceceilingof$9,ithasnoeffect,sincethemarketequilibriumpriceis$8,belowtheceiling.Sotheequilibriumpriceis$8andtheequilibriumquantityis6millionfrisbees.4. a. Figure6-4showsthemarketforbeerwithoutthetax.TheequilibriumpriceisP1andtheequilibriumquantityisQ1.Thepricepaidbyconsumersisthesameasthepricereceivedbyproducers.Figure6-4Figure6-5b. Whenthetaxisimposed,itdrivesawedgeof$2betweensupplyanddemand,asshowninFigure6-5.ThepricepaidbyconsumersisP2,whilethepricereceivedbyproducersisP2-$2.ThequantityofbeersolddeclinestoQ2.5. Reducingthepayrolltaxpaidbyfirmsandusingpartoftheextrarevenuetoreducethepayrolltaxpaidbyworkerswouldnotmakeworkersbetteroffbecausethedivisionoftheburdenofataxdependsonsupplyanddemand,notwhomustpaythetax.Sincethetaxwedgewouldbelarger,it’slikelythatbothfirmsandworkers,whosharetheburdenofanytax,wouldbeworseoff.6. Ifthegovernmentimposesa$500taxonluxurycars,thepricepaidbyconsumerswillriselessthan$500,ingeneral.Theburdenofanytaxissharedbybothproducersandconsumersthepricepaidbyconsumersrisesandthepricereceivedbyproducersfalls,withthedifferencebetweenthetwoequaltotheamountofthetax.Theonlyexceptionswouldbeifthesupplycurvewereperfectlyelasticorthedemandcurvewereperfectlyinelastic,inwhichcaseconsumerswouldbearthefullburdenofthetaxandthepricepaidbyconsumerswouldrisebyexactly$500.7. a. Itdoesn’tmatterwhetherthetaxisimposedonproducersorconsumerstheeffectwillbethesame.Withnotax,asshowninFigure6-6,thedemandcurveisD1andthesupplycurveisS1.Ifthetaxisimposedonproducers,thesupplycurveshiftsupbytheamountofthetax(50cents)toS2.ThentheequilibriumquantityisQ2,thepricepaidbyconsumersisP2,andthepricereceived(aftertaxesarepaid)byproducersisP2-50cents.Ifthetaxisinsteadimposedonconsumers,thedemandcurveshiftsdownbytheamountofthetax(50cents)toD2.Thedownwardshiftinthedemandcurve(whenthetaxisimposedonconsumers)isexactlythesamemagnitudeastheupwardshiftinthesupplycurvewhenthetaxisimposedonproducers.Soagain,theequilibriumquantityisQ2,thepricepaidbyconsumersisP2(includingthetaxpaidtothegovernment),andthepricereceivedbyproducersisP2-50cents.Figure6-6Figure6-7b. Themoreelasticisthedemandcurve,themoreeffectivethistaxwillbeinreducingthequantityofgasolineconsumed.Greaterelasticityofdemandmeansthatquantityfallsmoreinresponsetotheriseinthepriceofgasoline.Figure6-7illustratesthisresult.DemandcurveD1representsanelasticdemandcurve,whiledemandcurveD2ismoreinelastic.TogetthesametaxwedgebetweendemandandsupplyrequiresagreaterreductioninquantitywithdemandcurveD1thanfordemandcurveD2.c. Theconsumersofgasolinearehurtbythetaxbecausetheygetlessgasolineatahigherprice.d. Workersintheoilindustryarehurtbythetaxaswell.Withalowerquantityofgasolinebeingproduced,someworkersmaylosetheirjobs.Withalowerpricereceivedbyproducers,wagesofworkersmightdecline.8. a. Figure6-8showstheeffectsoftheminimumwage.Intheabsenceoftheminimumwage,themarketwagewouldbew1andQ1workerswouldbeemployed.Withtheminimumwage(wm)imposedabovew1,themarketwageiswm,thenumberofemployedworkersisQ2,andthenumberofworkerswhoareunemployedisQ3-Q2.TotalwagepaymentstoworkersareshownastheareaofrectangleABCD,whichequalswmtimesQ2.b. Anincreaseintheminimumwagewoulddecreaseemployment.Thesizeoftheeffectonemploymentdependsonlyontheelasticityofdemand.Theelasticityofsupplydoesn’tmatter,becausethere’sasurplusoflabor.c. Theincreaseintheminimumwagewouldincreaseunemployment.Thesizeoftheriseinunemploymentdependsonboththeelasticitiesofsupplyanddemand.Theelasticityofdemanddeterminesthequantityoflabordemanded,theelasticityofsupplydeterminesthequantityoflaborsupplied,andthedifferencebetweenthequantitysuppliedanddemandedoflaboristheamountofunemployment.d. Ifthedemandforunskilledlaborwereinelastic,theriseintheminimumwagewouldincreasetotalwagepaymentstounskilledlabor.Withinelasticdemand,thepercentagedeclineinemploymentwouldbelessthanthepercentageincreaseinthewage,sototalwagepaymentsincrease.However,ifthedemandforunskilledlaborwereelastic,totalwagepaymentswoulddecline,sincethenthepercentagedeclineinemploymentwouldexcee