ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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b. The programmers in this town are going to work at one of these two places for sure: Their labor supply is vertical, or in other words, perfectly inelastic, with supply equal to 100. So, what will the equilibrium wage be? Just as in Figure 18.1, the numbers may not work out exactly, so use your judgment to come up with a good answer.
Equilibrium wage: $ ___
Transcribed Image Text:One way to think about wages for different jobs is to see it as another application of the law of one price. We came across this
law when we discussed speculation in Chapter 7, and it came up again when we discussed international trade in Chapter 9. The
basic idea is that the supply of workers will keep adjusting until jobs that need the same kinds of workers earn the same wage. If
similar workers earned different wages, then the workers in the low-paid jobs would reduce their labor supply, and the workers in
the high-paid jobs would face more competition from those low-paid workers.
Let's look at 100 computer programmers who are trying to decide whether to work for one of two companies: Robotron or
Korrexia. To keep things simple, assume that both companies are equally fun to work for, so you don't need to worry about
compensating differentials here. The marginal product of labor (MPL) per additional hour of work for each firm is in the table.
Number of Programmers
Robotron's
Korrexia's
per Firm
MPL ($)
MPL ($)
10
100
55
20
75
40
30
60
30
40
55
25
50
40
20
60
30
10
70
25
5
80
20
90
10
100
Transcribed Image Text:The labor demand curve you constructed in part a is given in the accompanying diagram and also in the table.
Labor market
Wage
Number of
Wages (w)
($)
Programmers
$105
100
100
10
95
75
20
90
85
60
30
80
55
50
75
70
40
70
65
60
30
90
55
25
110
50
45
20
130
40
10
150
35
30
5
170
25
Demand
20
15
10
5
0 20
40
60
80
100
120
140
160
180
Quantity of labor (L)
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