Using scale and substitution effects, illustrate and explain your answer carefully. You are an economist hired by the AFL-CIO, a labor union.
Labor accounts for a relatively small share of the production costs of insulin.
Producers can either use workers to pack the insulin or there is a machine that can pack the insulin equally well. The machine is highly specialized however, and producers of the machines will increase the number of machines produced only when there is a large increase in the price of machines. Explain your answers carefully. Carefully analyze the effect of this proposal on the labor market for low skilled workers. Will low skilled workers be better or worse off after the increase in the minimum wage.