10 . Minimum-wage laws and unemployment

Consider the labor market defined by the supply and demand curves plotted on the following graph.

Use the calculator to help you answer the following questions. You will not be graded on any changes you make to the calculator.

0125250375500625750875100020.017.515.012.510.07.55.02.50WAGE (Dollars per hour)LABOR (Thousands of workers)DemandSupply

Graph Input Tool

Market for Labor
	Wage (Dollars per hour)
	Labor Demanded (Thousands of workers)			Labor Supplied (Thousands of workers)

Complete the following table with the quantity of labor supplied and demanded if the wage is set at $7.50. Then indicate whether this wage will result in a shortage or a surplus.

Hint: Be sure to pay attention to the units used on the graph and in the table. For example, type in 100 for 100,000 workers.

Wage	Labor Demanded	Labor Supplied	Shortage or Surplus?
(Thousands of workers)	(Thousands of workers)
$7.50			Shortage

Suppose the federal government contemplates a new law that would national minimum wage of $7.50 per hour.

Which of the following statements are true?Check all that apply.

In the absence of price controls, a shortage puts downward pressure on wages until they fall to the equilibrium.

If the minimum wage is set at $7.50, the market will still be able to reach equilibrium.

In this labor market, a minimum wage of $10.50 would be binding.

Binding minimum wages cause cyclical unemployment.