3. [Minimum Wage -55points] The goal of a minimum wage is to increase the standard of living of workers who are employed in sectors which employ low-skill workers.

a.Using labor supply and demand diagram, show the effect of a minimum wage on wage and employment. No explanation is required. (5p)

b.Use supply and demand diagram to determine the change in workers surplus, workers total earning, and social (or total) surplus as a result of the minimum wage. (10p)

Use supply and demand diagrams to illustrate your answer and explain. Your answers should be based on graphical analyses.

c.Explain why the employers' response to the minimum wage is a critical factor affecting the minimum wage policy's effectiveness. Specifically, discuss how the employers' response to the minimum wage impacts the change in workers' surplus and total earning as a result of the minimum wage(10p).

Use a supply and demand diagram to illustrate your answer and explain. Your answers should be based on graphical analyses. Your explanations should complement what you draw on your graphs.

d.Explain how the economic environment can affect the effectiveness of the minimum wage policy through those factors that we held fix (those that can shift supply and demand in markets for goods and services and in the labor market). (10p)

Use supply and demand diagrams to illustrate your answer and explain. Your answers should be based on graphical analyses. Your explanations should complement what you draw on your graphs.

e.The following features describe the current economic environment:

The Economy is on the path to recovery from the recession caused by Covid19. This primarily impacts the minimum wage sectors through the demand side (shifting the demand up).

Currently, labor unions have limited power in the minimum wage sectors. However, given the close ties between the Democratic Party and unions, one expects the labor unions to play more decisive roles in the minimum wage sectors in the next few years.Cheap robots are becoming increasingly accessible to employers, which mean that some employers might find hiring robots to be more economical than hiring humans over time.

Given this environment, assess the likelihood of the success of the Biden administration's efforts to improve the standard of livings of workers by increasing the federal minimum wage from 7.25 to 15$ an hour. Are there additional measures that the government should implement to ensure that the minimum wage increase has the desired effect on workers in this economic environment? (20p)

Use supply and demand diagrams to illustrate your answer and explain. Your answers should be based on graphical analyses. Your explanations should complement what you draw on your graphs.