Final answer:
To graph the equilibrium in the labor market, plot the supply and demand equations on a graph. The market clearing real wage is $15, the nominal wage is $30, and the total employment is 30 million. The government's minimum wage of $18 does not result in unemployment.
Step-by-step explanation:
In order to graph the equilibrium in the labor market, we need to understand the supply and demand equations. The supply equation, S, is given as S=2Wₛ, where Wₛ represents the real wage. The demand equation, D, is given as D=60-4Wₛ, where Wₛ represents the real wage. To graph these equations, we can plot them on a graph where the y-axis represents wage (Wₛ) and the x-axis represents employment. The intersection of the supply and demand curves represents the equilibrium in the labor market.
The market clearing real wage, nominal wage, and total employment can be determined at the equilibrium point. In this case, the equilibrium real wage is Wₛ=15, the nominal wage is P=2Wₛ=30, and the total employment is the quantity of labor hired at the equilibrium, which is 30 million. If the government sets a minimum (nominal) wage of $18, it is above the equilibrium wage of $15. This means that the minimum wage would not result in unemployment, as it is already higher than the equilibrium wage. However, it would lead to a distortion in the labor market, as some workers may demand higher wages but are unable to find jobs at the minimum wage.