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Draw labor supply and demand (assume demand is downward sloping and supply upward sloping). Show the equilibrium wage and employment level.
1)Show the effect of a minimum wage set above the equilibrium wage. What happens to employment and to wages? Is the higher minimum wage a good thing or bad for workers?
2) Research has found that higher minimum wages have minimal or no effects on employment. How might employers pay the higher minimum wage without laying off workers?
3)Consider the setting of pay for corporate CEOs. What do you think the effect would be of a pay maximum? Do you think that this would lead to a shortage in supply of people for the position of CEO? Do you think a supply and demand framework properly captures the setting of CEO pay?
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