Supply, Demand, and Market Efficiency ECON 1101 Principles of Economics Due date: Saturday, July 16 by 11:59 p.m. 1. Fast food saw an increasing shift to automation in 2016, with McDonald's widely adopting “Create your Taste” electronic kiosks where customers could place their order. Many customers are finding that automation adds consistency, gives greater opportunities for customization, and reduces human error. Publications including Forbes, Business Insider, and more report that the fight for higher minimum wages has expedited this shift. 

Corporate leaders such as the former President and CEO of McDonald's USA argue the success of “The Fight for 15” in states such as California has resulted in the closure of many small businesses, unable to pay the rising costs of labor, and lack the resources to switch to machines. Let’s consider the labor market for fast food and the possible impact of a minimum wage. 

(a) A supply and demand curve for the fast food labor market is presented below. Show the effect of imposing a $15 minimum wage on the labor price and quantity. Is there a shortage or surplus of labor? 

(b)  Suppose we are in an economy with a more inelastic demand curve, repeat exercise 

(a). How do the employment and unemployment compare to before? Draw a supply-and-demand diagram to explain. 

(c) Now suppose the Secretary of Labor proposes an increase in the minimum wage. What effect would this increase have on employment? How does that depend on the elasticity of demand and the elasticity of supply? 

(d) Comment on how automation affects the elasticity of demand for labour. Would easy access to automation make demand relatively more or less elastic? 

2. Read the news material, and provide your answers to the following questions: 

(a) Why do you think the producers of Hamilton charge much less for tickets than the ticket resellers charge? 

(b) Do you think there should be laws against reselling tickets above their face value? Why or why not?