Question

Recently, the Governor of California signed a bill that would raise the minimum wage to $15.00 per hour by the year 2022. The following article depicts the new law: http://www.marketwatch.com/story/california-new-york-pass-15-minimum-wage-laws-2016-04-01 . a. Demonstrate with an illustrative graph (no numbers) the likely impacts on supply, demand, and availability of labor in the California marketplace. b. Demonstrate what will likely happen to the supply curve for employers of minimum-wage workers, such as fast-food and agricultural firms. c. Explain what the affected employers might do to address the likely higher costs for producing fast food, agricultural products, and retail services.

Answer 1

A. As shown in figure 1 and 2 horizontal line above equilibrium or origin is minimum wage. In calif ornithology market place (fig 1) Labour supply is greater than demand here. So labour supply increases, demand decreases and thus labour availability increases

Here supply will increase more than in california in general. This is shown in fig 2)(employers of minimum wages workers)

The suppliers might simply reduce demand. At new equilibrium higher wage is equal higher marginal product of less labour