Final answer:
If everyone in America got a 5% raise tomorrow, the demand for chicken would likely increase because people would have more disposable income. The response in demand depends on chicken being a normal good and having positive income elasticity. The correct answer to the student's question is option (a) It would increase.
Step-by-step explanation:
If everyone in America got a 5% raise tomorrow, it is likely that the demand for chicken would increase. This is because people would have more income to spend, and as a result, they might choose to spend some of this extra income on buying more goods, including chicken. Typically, when incomes rise, demand for normal goods, which are goods that consumers buy more of as their income increases, also rises.
In examining a hypothetical scenario where a 5% increase in the minimum wage leads to a 5% reduction in employment, the effects on employers and workers would vary. Employers might experience higher labor costs, which could lead to an increase in prices or a reduction in profits, depending on whether they are able to pass these costs on to consumers. Workers who retain their jobs would benefit from higher incomes, but those who lose their jobs or are unable to find work due to the higher wage floor would face challenges. Whether this policy would be deemed good depends on a variety of factors including the goals of the policy, the state of the economy, and the values one places on employment versus wage levels. Lastly, the concept of unit elasticity indicates that the demand for a good changes by the same percentage as the price changes. However, in the case of income changes, the response depends on the income elasticity of demand for chicken. If chicken is a normal good with positive income elasticity, a rise in income would lead to an increase in demand.