Econ 103 Assignment

Homework: Article Instructions: 1- Select one article that relates to an economic subject. The article should be long enough to allow you to complete this assignment. However, there is no minimal (or maximum) length to the article that you select. You can also select a small portion of a book if you want. To help you, I include some potential articles here (but feel free to choose a different one if you want). Unfortunately, you cannot pick an article on the minimum wage since I’ve already presented an example using such an article. a. Proposed Article 1: ​Empty Shelves in Venezuela https://www.economist.com/the-americas/2015/01/22/empty-shelves-and-rhetoric

Things you should consider: What is going on in Venezuela? What kind of policies is the government using? What is the impact of such a policy from an economic point of view (Use graphs to help you answer)?

b. Proposed Article 2: ​Trump's Tariffs​ ​ ​https://www.bbc.com/news/world-43512098

Things you should consider: What is a tariff? How do they affect the economy? Who benefits and who suffers from tariffs (Use graphs to help you answer)?

c. Proposed Article 3: ​Carbon Tax https://www.theglobeandmail.com/opinion/editorials/article-it-works-sort-of-what-canada-can-le arn-from-bcs-carbon-tax/

Things to you should consider: What is a Carbon tax? What kind of market failure is the tax trying to address? What is the impact of not having a tax from an economic point of view (Use graphs to help you answer)?

Once you selected an article, you should: ​a. Summarize the article​ in roughly 0.5 to 1.5 pages (Line Spacing 1.5 lines). b. Explain some of the economic concepts​ that the article is presenting using the material seen in class in roughly 1 to 2 pages. (Graphs do not count towards the number of required pages.) 2- Presentation: ​Your assignment should​ look professional.​ It should include:

a. A title page (with Instructor name, Course name, Institution name, your name, date and assignment name). b. Make sure that you proofread the document. Some mistakes are acceptable, but mistakes in every sentences are not. c. A header at the bottom of each page with your name and the assignment name. d. A bibliography with at least 2 references used to complete the assignment. SAMPLE 1: The Minimum Wage and its Impact on welfare. Part A​ (Roughly 1 page of text): For this assignment, I selected the following two articles ​The argument in the floor ​and ​How the minimum wage promotes ageism. The first article discusses the debate in economics regarding the minimum wage. One side of the argument, using the basic logic that was introduced in the course, argues that the minimum wage hurts the poor. For this reason, many economists oppose minimum wages. On the other side of the debate are economists who argue that because firms have monopsony power, the minimum wage may actually improve both employment and pay. Until the 1990s, most economists sided towards the traditional argument that the minimum wage hurts the poor. However, in the 1990s, Card and Krueger published novel research that seemed to imply that the consensus opinion was wrong. They found that following an increase in the minimum wage in New Jersey, not only did wage go up, employment also increased! Economists on both sides of the argument started publishing research papers on the subject and today the debate has matured. The article goes on to describe some of the research done on both sides of this debate. Finally, they discuss the introduction of the minimum wage in the U.K. Apparently, the minimum wage in the U.K. boosted wages across the income distribution and reduced inequalities. They go on to discuss that bastions of economic orthodoxy, like the IMF or the OECD now argue that a moderate minimum wage does no harm and probably does some good.

The second article reviews a research article that argues that a different minimum wage, based on age, may lead to unemployment for young workers. It includes two graphs that show the salary of workers as they approach and pass 18 years old and the unemployment rate for these workers. The author spends a significant amount of time discussing the discontinuity (the jump in unemployment) and other “controls” that the authors of the research paper used. He concludes that the minimum wage change probably causes the unemployment jump that is observed. Part B​ (Roughly 1.5 pages of text): Both articles discuss the impact of a minimum wage. As such, I begin by discussing what we have seen in class about this subject. For this section, I propose that you follow using the following graph:

If we consider the market for unskilled labour, we have the demand for labour (Firms that wish to hire unskilled labour) and the supply of labour (Workers who are looking for a job). If the government imposes a binding price floor on this market the price of labour, the wage, will move from 𝑤∗ to 𝑤𝑃𝐹. (Ragan, 2017, p. 93)

Notice, that it is important that the price floor be binding. A non-binding price floor would be set below the equilibrium wage (𝑤∗). However, it would not have any impact on the market for unskilled labour. (Ragan, 2017, p. 93) Once the price floor is set, there will be an excess supply of labour (Ragan, 2017, p.96). The quantity supplied of labour will be 𝑄𝑆 and the quantity demanded will be 𝑄𝐷. This will lead to unemployment as much more workers are looking for work (𝑄𝑆) than firms who are willing to hire them (𝑄𝐷). Finally, we can find the Consumer Surplus and the Producer Surplus before and after the policy. It is clear from our graph that the consumer surplus shrunk. It was area A+B+C on our graph initially and now it is only area A. However, we cannot conclude if the Producer Surplus (The surplus that goes to workers) increased or decreased after the implementation of the policy. The producer surplus went from area D+E to area D+B. It is unclear if area B will be smaller or greater than area E (It will depend on the slope and intercepts for the demand and supply curves). I believe that this is the argument from the opponents of the minimum wage. The minimum wage boosts the wage of unskilled workers but decreases total employment and increases unemployment. It is impossible to say if the impact will be positive or negative for workers. The article also discusses the idea that economists have been arguing about this issue for a long time (I could discuss the difference between normative and positive statements here, but I leave it out to give you things to discuss in your own assignment). I believe the reason this debate as lasted for so long is that it can be hard to distinguish between correlation and causation. Causation arises when 1 variable causes another variable to change while correlation arises when 2 variables move together (Ragan, 2017, p.31). It is important to understand that with correlation the relationship between 2 variables might be purely based on luck. This makes it hard for economists to establish if the changes in unemployment and wages are caused by the minimum wage or simply a correlation. I used the second article because it demonstrate this point quite clearly. The author spends a lot of effort trying to argue that other variables were accounted for or that no other “discontinuity” exist. I believe the author is doing this to convince the reader that the link between the change in the minimum wage and unemployment is in fact causal and not simply a correlation. Bibliography: