1. Unit 5: The Resource Market
(aka: The Factor Market or Input Market)

2. Video: Did You Know?

3. Market Imperfections

4. What are other reasons for differences in wage?
Labor Market Imperfections-
Insufficient/misleading job information-
This prevents workers from seeking better employment.
Geographical Immobility-
Many people are reluctant or too poor to move so they accept a lower wage
Unions
Collective bargaining and threats to strike often lead to higher that equilibrium wages
Wage Discrimination-
Some people get paid differently for doing the same job based on race or gender (Very illegal!).

5. “Glass Ceilings”

6. Do you support this new law?
Minimum Wage
Assume the government was interest in increasing the federal minimum wage to $15 an hour
Do you support this new law?
Why or why not

7. Fast Food Cooks Wage S $15 $8 $6 D 5 6 7 8 9 10 11 12 Q Labor
The government wants to “help” workers because the equilibrium wage is too low D
Q Labor

8. Government sets up a “WAGE FLOOR.”
Fast Food Cooks
Wage S
$15 $8 $6
Government sets up a “WAGE FLOOR.”
Where? D
Q Labor

9. Minimum Wage Above Equilibrium! Wage S $15 $8 $6 D 5 6 7 8 9 10 11 12
Q Labor

10. Minimum Wage What’s the result? Q demanded falls.
Surplus of workers
(Unemployment) S
$15 $8 $6
What’s the result?
Q demanded falls.
Q supplied increases. D
Q Labor

11. Identify the number of workers that lost their job and the number unemployed
Wage
Supply
$20
$10
30 Fired
50 Unemployed
Demand 70
100
120
Quantity

12. Is increasing minimum wage good or bad?
GOOD IDEA-
We don’t want poor people living in the street, so we should make sure they have enough to live on.
BAD IDEA-
Increasing minimum wage too much leads to more unemployment and higher prices.

13. Minimum Wage Worksheet