The government increase the minimum wage. The National Association of Fast Food Restaurants hires you to determine the impact that this higher minimum wage will have on it industry. This is an example of ?
Correct answer: C. partial equilibrium analysis
- A. industry equilibrium analysis
- B. specific equilibrium analysis
- C. partial equilibrium analysis
- D. general equilibrium analysis
Explanation
Partial equilibrium analysis studies the effect of a policy in one market while holding conditions in other markets broadly constant. The focus here is the fast-food labour market and industry.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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