There are two distinct sectors: taxidermists (X) and tap dancers (T).

It is surprising that there is complete labor mobility between the

two sectors. There are 200 equally talented workers who supply their labor in elastically. The demand for taxidermists is EX = 190 10 WX, and the demand for tap dancers is ET = 160 -5 W T

a) What is the competitive equilibrium outcome (equilibrium wage and employment level in each sector) in this labor market?

b) What would happen if the government imposed a minimum wage of $12 that covered only the tap dancer sector?</p>

a. Equilibrium wage in taxidermist:

Equilibrium wage can be calculated by equating labor demand and supply. This is done as
follows::
Labor demand Labor supply
200=190 10 Wage
10 Wage 200 190
10
10
1

Wage

$1
Hence, equilibrium wage is

Equilibrium employment in taxidermist:

Equilibrium employment can be calculated by substituting equilibrium wage in labor demand of
taxidermist. This is shown in below:
Equilibrium employment 190 10 Wage
=190 10 1
180

180
Hence, equilibrium employment in taxidermist is

Equilibrium wage in tap dancer:

Equilibrium wage can be calculated by equating labor demand and supply. This is done as
follows::
Labor demand Labor supply
200=160 5 Wage
5 Wage 200 160
40
Wage
5
8

$8
Hence, equilibrium wage is

Equilibrium employment in tap dancer:

Equilibrium employment can be calculated by substituting equilibrium wage in labor demand of
tap dancer. This is shown in below:

Equilibrium employment 160 5 Wage

=160 5 8
120
120
Hence, equilibrium employment in tab dancer is

b. Equilibrium employment in tap dancer after minimum wage of $12:

Equilibrium employment after minimum wage can be calculated by substituting minimum wage
in tap dancer demand. This is done as follows::
Labor demand Labor supply
200=160 5 12
160 60
100

100
Hence, equilibrium employment after minimum wage is