Portray Graphically The Outcomes Of Before And After The Imp

Portray Graphically The Outcomes Of Before And After The Imposition Of

Portray graphically the outcomes of before and after the imposition of minimum wage in the following two hiring scenarios of Kellogg’s firm. Draw all curves on one graph so comparisons can be made.

- Firm A: Kellogg’s firm hiring economic advisors who are each deemed to be heterogeneous to whom the firm can practice wage differentiation. Label the curves Value of Marginal Product for Firm A as VMP A, Marginal Revenue Product for Firm A as MRP A, Supply of Labor for Firm A as S L A, Wage curve for firm A as W A, Marginal Factor Cost for Firm A as MFC A. Label the wage paid by Firm A before minimum wage imposition as WA1 and wage paid by Firm A after the minimum wage imposition as WA2. Label the amount of labor hired before minimum wage imposition as LA1 and the amount of labor hired after the minimum wage imposition as LA2.

- Firm B: Kellogg’s firm hiring janitors whose labor are deemed to be homogeneous. Label the curves Value of Marginal Product for Firm B as VMP B, Marginal Revenue Product for Firm B as MRP B, Supply of Labor for Firm B as S L B, Wage curve for firm B as W B, Marginal Factor Cost for Firm B as MFC B. Label the wage paid by Firm B before minimum wage imposition as WB1 and wage paid by Firm B after the minimum wage imposition as WB2. Label the amount of labor hired before minimum wage imposition as LB1 and the amount of labor hired after the minimum wage imposition as LB2.

Paper For Above instruction

The minimum wage policy is a pivotal tool within labor economics, aimed at enhancing wage levels for low-income workers while also influencing employment dynamics and overall market equilibrium. This paper examines the graphical outcomes of imposing a minimum wage in two distinct scenarios within Kellogg’s firm: one involving heterogeneous advisors and the other involving homogeneous janitors. Employing comprehensive demand and supply analysis, we analyze how minimum wage affects wages, labor quantity, and overall market interactions for both cases, providing insights into the nuanced impacts of wage regulation.

In the context of labor market analysis, the traditional framework involves plotting the value of marginal product (VMP), marginal revenue product (MRP), supply of labor curves (S L), wage curves (W), and marginal factor costs (MFC). These graphs elucidate the equilibrium conditions determining wages and employment levels before and after minimum wage imposition. For Firm A, which employs heterogeneous economic advisors, the friction and wage differentiation ability imply a more complex labor demand curve. The firm can pay different wages to advisors based on their marginal productivity, which can be characterized by a downward-sloping VMP A curve and an upward-sloping MFC A curve. Before the policy implementation, the intersection of MFC A and S L A determines the equilibrium wage WA1 and employment LA1. When a minimum wage WA2 is set above the initial equilibrium, the labor market responds with a change in hiring levels, typically reducing employment to LA2, depending on the position of the minimum wage relative to the equilibrium.

Graphically, imposing a minimum wage above the initial equilibrium wage creates a binding constraint. The wage curve W A shifts or becomes a horizontal line at the mandated wage level WA2, intersecting the supply curve S L A at a new point that determines the labor quantity LA2. Since the firm can no longer pay wages below the minimum, the MFC A curve aligns with this higher wage, often leading to an excess supply of labor—some applicants are willing to work at WA2 but the firm chooses to hire fewer workers, resulting in unemployment or labor misallocation. The heterogeneity of advisors allows for wage differentiation, but minimum wage legislation constrains this flexibility, potentially producing employment reductions or increased unemployment for certain segments.

In the case of Firm B, which employs homogeneous janitorial labor, the market demand and supply are represented by curves VMP B, MRP B, S L B, W B, and MFC B. Before the introduction of the minimum wage, equilibrium wages WB1 and employment LB1 are determined at the intersection of MFC B and S L B. The application of a minimum wage WB2 set above WB1 alters the market dynamics, similar to Firm A. The wage becomes crowded at a higher level, causing the supply of labor to exceed labor demand at that wage point, thus creating an excess supply or surplus of janitorial workers.

Graphically, the minimum wage WB2 shifts the effective wage ceiling or horizontal constraint. The supply of labor at the new wage exceeds the demand, with the employment level dropping to LB2. The surplus labor occurs because the minimum wage exceeds the market equilibrium, incentivizing some workers to supply labor but firms to demand less. The outcome also induces potential unemployment unless the surplus is absorbed through increased productivity or reduced labor hours. Given the homogeneous nature of janitorial labor, the impact on wages is clearer, often leading to an increase in wages and a contraction in employment levels.

Both scenarios illustrate that the imposition of a minimum wage above the market-clearing level results in higher wages but often leads to reduced employment levels. The heterogeneity or homogeneity of labor influences the degree and nature of these effects. In the heterogeneous case, wage differentiation is constrained, potentially reducing incentives for firms to hire as many advisors, while in the homogeneous scenario, employment and wages adjust in a more predictable manner. These graphical representations underscore fundamental economic principles: a binding minimum wage can create surpluses, unemployment, and shifts in labor market equilibrium, with implications for employment policies and economic efficiency.

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