Question

There are 45 potential workers in this economy. How many people are unemployed?

Given:

Labor supply: 18
Minimum wage: $12
Equilibrium wage: $18
Labor demand: 33
Number of workers: 45
a) 12
b) 27
c) 33
d) 45

Answer 1

The number of unemployed people is 12, calculated by subtracting the number of employed people (33), dictated by labor demand, from the total labor supply (45).

Step-by-step explanation:

To determine how many people are unemployed in this economy, we need to understand the effect of the minimum wage on the labor market. Given the labor supply of 18 and a labor demand of 33 at an equilibrium wage of $18, we can infer the number of people who are actually working. Since the minimum wage is set at $12, which is below the equilibrium wage, it is not the binding constraint in this situation. However, because only 33 people out of a labor supply of 45 are employed (due to the labor demand), this implies that there are 45 - 33 = 12 people who are unemployed. Therefore, the correct answer is (a) 12.