Use the graph to answer the following question
Supply and demand graph for the labor market of fast food restaurants
Using specific numbers from the graph, explain what would happen in this market if a new minimum price of $15 was instituted by the United States Government. Be sure to include information identifying if this is a ceiling or a floor, and the exact amount of shortage or surplus that would result. (5 points) Given this shortage or surplus, explain why the government would still choose to implement this policy (2 points), and explain if you would support such a change. Give at least 2 reasons you would or would not. (3 points)
(10 points)
If a new minimum wage of $15 was instituted by the United States Government in the fast food labor market, it would act as a price floor. Looking at the graph, if the minimum wage is set at $15, the quantity of labor supplied would be higher than the quantity demanded, resulting in a surplus of labor. This surplus would be the difference between the quantity supplied and the quantity demanded at that price, which is equal to 200 units.
The government would still choose to implement this policy despite the surplus because they would be prioritizing the well-being and financial stability of the workers in the fast food industry. By setting a higher minimum wage, workers would be able to earn a more livable wage and potentially lift themselves out of poverty. Additionally, the government may believe that the benefits of higher wages for workers outweigh the costs of potential job losses or labor surpluses.
I would support such a change for several reasons. Firstly, a higher minimum wage could help reduce income inequality and improve overall economic equality. Secondly, paying fast food workers a more livable wage could decrease the reliance on government assistance programs, ultimately saving taxpayer money. However, some reasons why I may not support this change include concerns about potential job losses and increased costs for consumers. Additionally, some economists argue that minimum wage increases could lead to inflation and harm small businesses.