b.Suppose that instead of a minimum wage,the government pays a subsidy of $1 per hour for each employee What will the total level of employment be now?What will the equilibrium wage rate be? Let w denote the wage received by the employee. Then the employer receiving the $1 subsidy per worker hour only pays w-1 for each worker hour.As shown in Figure 9.1.b.the labor demand curve shifts to: LD=80.10(w-1)=90.10w where w represents the wage received by the employee The new equilibrium will be given by the intersection of the old supply curve with the new demand curve,and therefore,90-10w**=10w**,or w**=$4.5 per hour and L=10(4.5)=45 million persons employed.The real cost to the employer is $3.5 per hour. ,L-10m (subsidy) D-90-10m 4045 80 90 Figure 9.1.b 2.Suppose the market for widgets can be deseribed by the following equations: Demand:P=10-Q Supply:P=Q-4 where P is the price in dollars per unit and Qis the quantity in thousands of units. a.What is the equilibrium price and quantity? To find the equilibrium price and quantity,equate supply and demand and solve for Qgo 10.Q=Q.4,orQe=7 Substitute into either the demand equation or the supply equation to obtain Pro. Pg0=10.7=3 or PE0=7.4=3. b. Suppose the gover ment imposes a tax of $l per unit to reduce consumption and raise government revenues.b. Suppose that instead of a minimum wage, the government pays a subsidy of $1 per hour for each employee. What will the total level of employment be now? What will the equilibrium wage rate be? Let w denote the wage received by the employee. Then the employer receiving the $1 subsidy per worker hour only pays w-1 for each worker hour. As shown in Figure 9.1.b, the labor demand curve shifts to: LD = 80 - 10 (w-1) = 90 - 10w, where w represents the wage received by the employee. The new equilibrium will be given by the intersection of the old supply curve with the new demand curve, and therefore, 90-10W** = 10W**, or w** = $4.5 per hour and L** = 10(4.5) = 45 million persons employed. The real cost to the employer is $3.5 per hour. W L = 10w s 9 8 4.5 4 40 45 80 90 wage and employment after subsidy L = 90-10w D (subsidy) L = 80-10w D L Figure 9.1.b 2. Suppose the market for widgets can be described by the following equations: Demand: P = 10 - Q Supply: P = Q - 4 where P is the price in dollars per unit and Q is the quantity in thousands of units. a. What is the equilibrium price and quantity? To find the equilibrium price and quantity, equate supply and demand and solve for QEQ: 10 - Q = Q - 4, or QEQ = 7. Substitute QEQ into either the demand equation or the supply equation to obtain PEQ. PEQ = 10 - 7 = 3, or PEQ = 7 - 4 = 3. b. Suppose the government imposes a tax of $1 per unit to reduce widget consumption and raise government revenues. What will the new