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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: $ ___

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: $ ___

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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: $ ___
 
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: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
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 $105 100 100 10 95 75 20 90 85 60 30 80 55 50 75 70 40 70 65 60 30 90 55 25 110 50 45 20 130 40 10 150 35 30 5 170 25 Demand 20 15 10 5 0 20 40 60 80 100 120 140 160 180 Quantity of labor (L)
Transcribed Image Text:The labor demand curve you constructed in part a is given in the accompanying diagram and also in the table. Labor market Wage Number of Wages (w) ($) 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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