Chapter Questions
Explain, using the marginal, opportunity cost, cost-benefit, and interdependence principles, why, in most occupations, the market labor supply curve is upward-sloping.
Use the marginal, opportunity cost, cost-benefit, and interdependence principles to explain why labor demand is typically downward-sloping.
The governor is concerned about poverty in the state and proposes that the state minimum wage be raised from $\$ 7.25$ per hour to $\$ 15.00$ per hour. She claims that this would be an effective way to assist lower income families; however, she is worried that a large number of jobs will be lost as a result. Briefly evaluate her arguments using a labor supply and demand graph. Explain how the long-run impact of the minimum wage law may be different than the short-run impact.
Think about the career you hope to have after college. What annual income do you hope to earn and how many hours per week do you plan on working? Use this information to find your future wage. Use the marginal principle to explain how the number of hours you work each week would change if you get an unexpected raise of $50 \%$ ? A pay cut of $50 \%$ ? Draw your labor supply curve for these values and describe the relationship between the income effect and substitution effect on your various wages.
During the period from 2007 to 2009 , the number of new automobiles sold in the United States fell from 16 million to 10.4 million. How do you expect the decrease in demand for cars to affect the price of cars? During that same period, employment in motor vehicles and parts manufacturing fell from 1 million workers to 622,000 . Why does a decrease in demand for cars lead to a decrease in demand for autoworkers?