Now suppose that labor demand is relatively elastic. Draw the responses to the same negative labor supply shock. Which one has a larger impact on output and price? Explain (briefly). Pt Yt Lt
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Solve the attachment
Negative supply shock refers to the shocks that decrease the supply due to various factors.
A negative labor supply shock results in a decrease in the supply of labor.
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- Suppose a firm's labor demand equation is Ld=50-4(w), and the labor supply equation that it faces is L, -14 + 4(w), where w is the wage per hour worked. The government imposes a minimum wage that is 25% above equilibrium wage. As a result there will be O an increase in unemployment by 26. a decrease in unemployment by 10. an increase in unemployment by 16. a decrease in unemployment by 12. O no change in unemploymentSuppose aggregate labour supply is measured as aggregate number of hours worked (L) given wage (w). A. Graph the labour supply if L = 3w. Write the formula for the (total) elasticity of labour supply in this case and substitute out L. After simplifying, the (total) elasticity of labour supply is B. Graph the labour supply if L = 16w. Write the formula for the (total) elasticity of labour supply in this case and substitute out L. After simplifying, the (total) elasticity of labour supply is C. Graph the labour supply if L = 3w - 3. Write the formula for the (total) elasticity of labour supply in this case and substitute out L.Describe wage determination in a labor market in which workers are unorganized and many firms actively compete for the serVices of labor. a. Given the competitive market for labor shown In the diagram on the left, indicate the equilibrium wage rate and the equilibrium quantity of workers hired by the firm. Instructions: (1) Use the tool provided 'A' to identify the quantity of labor hired by the firm and the wage rate paid. (2) Use the three- point shading tool 'Nonlabor' to identify the nonlabor costs. (3) Use the four-point shading tool 'Wage cost' to identify the wage costs to the firm. A Single Competitive Firm 50 Тools Competitive Labor Market 40 50 A Nonlabor 30 40 Wage cost 20 30 10 20 D = MRP D = MRP 10 10 20 30 40 50 Quantity of labor Quantity of labor Wage rate (dollars) Wage rate (dollars)
- Suppose that the labor demand for restaurant waiters in a small city is LD = −10 + 20w wherew is wage in dollars per hour.1. Derive the formula of the wage-elasticity of labor demand.2. Solve for the wage-elasticity of labor demand at the following wage rates below. Tell whetherlabor demand is elastic, inelastic, or unit elastic at each given wage rate.a. w = 4b. w = 6Define "the wage elasticity of supply" and derive an equation to describe the correlation between this elasticity and a labor supply curve. Then determine whether the following statement is true or false: "If women's labor supply in an economy is more elastic than that of men, it would be easier for firms to induce women workers to accept jobs." Explain your answer in words and show it in diagrams.Explain how and why the method of instrumental variables allows us to estimate the labor demand elasticity.
- Look at the graph below. Labor demand falls from D0 to D1 due to an economic recession. What is the resulting wage in the short-run due to this shift in demand? HINT: Consider whether this is a situation in which the wages are sticky or flexible. Wage Rate 40 35 30 25 20 15 10 5 0 5 10 15 20 25 30 Quantity of Labor D1 35 40 DOAnswer the following questions based on the below diagram that shows the labour demand curve for a firm, where X is the mid-point of the line MN. Wage (RM) M 12 Quantity of labour 3 6. a. Calculate the elasticity of labour demand between the wage of RM2 and RM4. b. Calculate the elasticity of labour demand between the wage of RM8 and RM10. 6.Some Firms Struggle to Hire Despite High Unemployment Matching people with available jobs is always diffi- cult after a recession as the economy remakes itself. But Labor Department data suggest the disconnect is particularly acute this time. Since the recovery began in mid-2009, the number of job openings has risen more than twice as fast as actual hires. If the job mar- ket were working normally, openings would be get- ting filled as they appear. Some five million more would be employed and the unemployment rate would be 6.8%, instead of 9.5%. Source: The Wall Street Journal, August 9, 2010 9. If the labor market is working properly, why would there be any unemployment at all?
- Explain the relationship between the own-wage elasticity of labor demand and output demand elasticity. labour costs as a share of total costs of production.Suppose that Congress caps executive pay at a level below the equilibrium. The quantity of executives demanded will OA. increase; increase OB. increase; decrease C. decrease; increase OD. decrease; decrease Executive pay will ▼ The outcome is inefficient because OA. there is surplus of executives and some become unemployed O B. the marginal benefit to firms exceeds the marginal cost of work to executives OC. the marginal cost of work to executives exceeds the marginal benefit to firms O D. government employees will move to the private sector #3 4 the quantity of executives supplied will 5 O 9 6 & 7 4 8 ÖConsider a Sraffa system that describes production with a surplus. Assume that the whole of the wage is variable. The number of commodities in the system is "n". Some are non-basic commodities. . Write the price equations in matrix notation. (Make sure to mention the dimensions of the vectors and matrix in your equation). . Explain the economic meaning of the A matrix and l vector.
