Now return to the conditions ofD=1002p

andS=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.)

S=

D=

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

.

=

=

Express the tax incidence for workers asz

. Calculate

.

=

Was this strategy effective at raising take-home wages?