Question

The minimum wage is increased from $7.25 to $9.00 per hour. Calculate the elasticity of demand for fast food workers over the relevant portion of the demand curve using the simple formula. Throughout your calculations round to two decimals.

Answer 1

As the question was not complete. I have attached the complete question in the attachment. Please refer to attachment.

Step-by-step explanation:

By using, LD = 95- 3w and w1 = 7.25 and w2 = 9. We get,

LD1 = 95-3(7.25) = 73.25

LD2 = 95-3(9) = 68

Elasticity = Change in labor demand/ change in wage rate = ((68- 73.25)/ 73.25)/ ((9-7.25/7.25)) = -0.33

The 11 percent change in the wage rate causes, 33% change in labor demanded, as shown by the elasticity, the labor demand decreases with increase in wage rate.