1)Texaco employs workers on its oil rigs. The supply and demand for labor isD=1002p

andS=10+p. In equilibrium, what is the wage of labor?

P*= ?

Q*= ?

2)Suppose now that the government sets a minimum wage of $40 for oil rig workers due to the dangers of the job.

In the new equilibrium, what is the wage of labor?

P*=?

Q*?=

What is the excess supply of labor?=

3)Consider a positive shock to labor demand. Texaco has discovered a new technology that increases their value from each worker, so they are willing to pay$x more per worker. Find the minimumxsuch that the minimum wage is not binding.

x= ?

4)Under the new technology where$xis the minimum you found earlier, how manymoreworkers are hired than in the minimum wage scenario with old technology?

5)Now return to the conditions ofD=1002pandS=10+p.

What are the price elasticities of supply and demand at equilibrium? (Hint: Price elasticity of supply is positive. Price elasticity of demand is negative.)

Es=?

Ed=?

6)The government noticed that when taxes on workers went up, wages also went up. Suppose that instead of a $40 minimum wage, the government taxes each worker by$z(withz>0) to raise worker wages. Express the equilibrium take-home (post-tax) wage for workers as a function ofz:+z. Calculateand.

=?

=?

=?