The Effect of Wage Increase on the U.S. Lettuce Market

This paper aims to examine the effect of wage increase on the U.S. lettuce market by using Equilibrium Displacement Model. The paper estimates lettuce demand using Rotterdam demand model. The results show that the demand for lettuce is price and income inelastic, and lettuce is a necessity good. The results of the supply model show that the supply of lettuce is price inelastic, and wage increase has a negative impact on lettuce supply. The total elasticities of wage show that an increase in wage increases price and reduces quantity. Furthermore, the paper shows that the reduction in producer surplus as a result of wage and income increaseis larger than the reduction in consumer surplus.