Figure 6-9Refer to Figure 6-9.In this market, a minimum wage of $7.00 creates a labor

Question

BlackTom AI · Accepted Answer

To analyze the effect of a minimum wage set at $7.00, we first identify the quantities corresponding to that wage on the supply and demand curves shown.
- On the demand curve, the relationship between wage and quantity demanded is such that at a wage of $7, the quantity of labor demanded is 3 thousand hours. This comes from the downward-sloping demand line crossing the wage level of 7 at Qd = 3.
- On the supply curve, the upward-sloping supply line indicates that at a wage of $7, the quantity of labor supplied is 7 thousand hours. This is read where the wage level of 7 intersects the supply line, giving Qs = 7.

With a minimum wage above the equilibrium, a surplus arises when more workers are willing to work than there are jobs available, i.e., QS > QD.
- The surplus in hours is QS − QD = 7 − 3 = 4 thousand hours.

Therefore, at a $7.00 minimum wage, the labor market shows a surplus of 4 thousand worker hours.

If one were to compare with other hypothetical choices (e.g., a larger or smaller surplus), you would look at the vertical gap between the supply and demand quantities at the set wage, which is exactly what yields the 4 thousand-hour figure here. The key points are identifying QD and QS at the wage and then computing the difference.

Figure 6-9Refer to Figure 6-9.In this market, a minimum wage of $7.00 creates a labor

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