Answer to Question #88808 in Economics of Enterprise for Nandy

Question

Tom is a full-time lecturer at a private higher education institution and is considering a career in carpentry. He wishes to pursue a career in carpentry (a childhood dream) which he has studied part time and is now equipped to take on clients. In his current position he earns a rate of R1000 per day and if he were to persue a career in carpentry he would earn R800 per day. Due to the flexibility of the employment conditions at the higher education institution he works for, Tom can negotiate the number of days he works at and will receive a rate of remuneration based on the number of days worked.

In the labour market for carpenters, the current market clearing wage rate is R800 per day. With the aid if a diagram, discuss the welfare effects of government intervention in the form of legislation that sets the minimum wage rate for a carpenter at R1000 per day

Answer 1

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