Advisory
- Read Chapters 3 and 4 (skip financial markets for now) and ponder on the questions I have raised in the announcements.
- Watch the video I referenced in the announcement first.
- Read Chapters 3 and 4 (skip financial markets for now) again and ponder on the questions I have raised in the announcements.
- Proceed with these slides.
The four-step process
- Draw a demand and supply model before the economic change took place.
- Decide whether the economic change you are analyzing affects demand or supply.
- Decide whether the effect on demand or supply causes the curve to shift to the right or to the left, and sketch the new demand or supply curve on the diagram.
- Identify the new equilibrium and then compare the original equilibrium price and quantity to the new equilibrium price and quantity.
Apply the four-step process
Explain using a demand and supply model what has happened based on this news clip.
Controversy about the minimum wage
- A minimum wage “makes it illegal for an employer to pay employees less than a certain hourly rate.”
- Use the four-step process to analyze the consequences of a minimum wage. Draw pictures!
- From the perspective of a demand and supply model, why is a minimum wage unattractive?
- Should we have a minimum wage? This is now entering into normative territory.