There are 45 potential workers in this economy. how many people are unemployed ?

The correct answer is: 27.

In this labor market the equilibrium price is $12, but price floor or minimum wage has been established at $18.

A price floor is defined as the minimum price allowed for a good, which is established by an economic authority and which distorts the market when it is located above the equilibrium price, creating a situation of excess supply. The most famous price floor is the minimum wage in the labor market.

Therefore, in the labor market analyzed there is a situation of excess supply. There are 45 potential workers who are offering their services in the labor market but, at the predefined price level ($18), only 18 workers are demanded, and hence, only 18 people are able to find a job.

The number of unemployed people in this economy is: 45 - 18 = 27.

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