7.2 The Thai government actively intervenes in markets

(Nophakhun Limsamarnphun, “Govt Imposes Price Controls in Response to Complaints,” The Nation, May 12, 2012).

a. The government increased the daily minimum wage by 40% to Bt 300 ($9.63). Show the effect of a higher minimum wage on the number of workers demanded, the supply of workers, and unemployment if the law is applied to the entire labor market.

b. Show how the increase in the minimum wage and higher rental fees at major shopping malls and retail outlets affected the supply curve of readyto-eat meals. Explain why the equilibrium price of a meal rose to Bt 40 from Bt 30.

c. In response to complaints from citizens about higher prices of meals, the government imposed price controls on 10 popular meals. Show the effect of these price controls in the market for meals.

d. What is the likely effect on the labor market of the price controls on meals?