1. In a 1973 paper entitled "A Living Wage," published in Annals of the American Academy of Political and Social Science (vol. 409:33-41), Daniel R. Fusfeld from the Department of Economics at the University of Michigan makes the following statement: . "The only effective way to eliminate poverty in the United States is to pay all workers a living wage. As long as working people labor in jobs in which earnings are inadequate to meet even the poverty standards of income, their families will remain poor; furthermore, their poverty will be reproduced from one generation to the next. Our society will continue to suffer from all of the ills associated with poverty: disease, degradation, crime, hostility and anger." (p. 35) This essay is a normative assessment of the living (or minimum) wage. In your short-answer essay, include the following elements: 

a. What is the purpose of a living wage? 

b. Compare and contrast the effects of a living-wage policy set in a labor market where the demand for workers is relatively price inelastic and one where it is relatively price elastic. Graph and explain your results, 

2. An election is coming up. The government has decided to curry votes from the cotton-growing states, so it has determined that the price of cotton is too low.

a. Suppose the government imposes a binding price floor on the cotton market. Draw a market model, showing the surplus of the market. 

b. If the demand for cotton is elastic, why has the revenue in the market for cotton decreased?