LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 4, Problem 3P
To determine
Calculate the wage and employment level.
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Students have asked these similar questions
If equilibrium wage is $10 and current wage is 9$, then we expect to have
more wokers than jobs and thus we should decrease wages
less workers than jobs and thus we should increase wages
more wokers than jobs and thus we should increase wage
less wokers than jobs and thus we should decrease wages
None of the above
Please answer the first 3 questions.
Suppose that labour demand and labour supply are represented by the equations:
Demand: LD = 10 - 0.5W
Supply: LS = 0.5W
a. Find the equilibrium wage and employment levels.
b. Graph the curves and indicate the equilibrium on a graph.
c. Suppose hiring is done through a labour union in this market which has limited hiring to 4 workers. What will be the wage in this market?
d. Give one factor which causes labour demand to increase and one factor which causes labour supply to increase.
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?
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Similar questions
- Please answer the c and d. Suppose that labour demand and labour supply are represented by the equations: Demand: LD = 10 - 0.5W Supply: LS = 0.5W a. Find the equilibrium wage and employment levels. b. Graph the curves and indicate the equilibrium on a graph. c. Suppose hiring is done through a labour union in this market which has limited hiring to 4 workers. What will be the wage in this market? d. Give one factor which causes labour demand to increase and one factor which causes labour supply to increase.arrow_forwardUse the wage curve and the profit curve to show the equilibriumin a model of the labour market. Explain briefly why this equilibrium implies involuntary unemployment.arrow_forwardAssume that the supply of low-skilled workers is fairly elastic, but the employers’ demand for such workers is fairly in elastic.If the policy goal is to expand employmentforlow-skilledworkers,is it better to focus on policy tools to shift the supply of unskilled labor or on tools to shift the demand for unskilled labor?Whatif the policy goal is to raise wages for this group? Explain your answers with supply and demand diagrams.arrow_forward
- The diagram on the right shows a perfectly competitive labour market. The initial equilibrium is with wage w* and employment L*. a. Suppose the demand for labour decreases to D'L. If wages are perfectly flexible, what is the effect on the wages and employment? If wages are perfectly flexible, wages will decrease decrease and employment will Use the point drawing tool to plot the new equilibrium point. Carefully follow the instructions above, and only draw the required object. Real Wage Part a Employment OUarrow_forwardExplain in two ways how the equilibrium wage can be disturbedarrow_forwardPlease only awnser this question I must give uou the previous question below it for context Please awnser this one: In the same model of the labour market as in the previous question,Select one or more:a. A rise in labour supply will lead to a rise in wagesb. Given a constant mark-up a rise in labour productivity will lead to higher wagesc. A rise in product market competition will lead to a higher mark-upd. Equilibrium employment is given by the intersection of the wage and profit curves This one is just for context so you can awnser the question: Given labour market equilibrium with identical workers, as set out in CORESelect one or more:a. Unemployment is always voluntaryb. Workers who are involuntarily unemployed cannot gain a job at any wagec. A Nash equilibrium existsd. Measured unemployment will be zeroarrow_forward
- In a particular industry, labor supply is ES = 10 + w and labor demand is ED = 40 - 4w, where E is the level of employment and w is the hourly wage. a. What are the equilibrium wage and employment if the labor market is competitive? What is the unemployment rate? b. Suppose the government sets a minimum hourly wage of $8. How many workers would lose their jobs? How many additional workers would want a job at the minimum wage? What is the unemployment rate?arrow_forwardConsider a simple demand-and-supply model of a competitive labour market in a small town. The demand and supply curves for labour are given by Demand: w=20-4LD S Supply: w=4+4L` where w is the wage ($ per hour) and L is the number of hours of employment (measured in thousands of hours per month). a. Use the line drawing tool to plot the demand and supply curves in the graph at the right. Use points with labour hours value of 0 and 5 to draw the lines. Label the lines properly. Carefully follow the instructions above, and only draw the required objects. D Wage ($ per hour) 24- 22- 20- 18- 16- 14- 12- 10- 8- 6- 4- 2- 0+ 0 Labour Market 1 2 3 4 Labour (thousands of hours per month) 5 ONarrow_forwardDoes it make sense that the definition of macroeconomic equilibrium allows the existence of involuntary unemployment? Would you not expect that, in such a case, wages would fall, which would lead to an increase in the demand for labor and hence the elimination of the involuntary unemployment?arrow_forward
- Assume that the labour demand equation for a fictional country is L = 90 – 2(w), where w is the wage per hour worked. Also, assume that the labour supply equation for that country is Ls = 0.5(w). Instructions: Round your answers to the nearest whole number. a. The equilibrium wage is $ , and the equilibrium quantity of labour employed is workers. b. At the equilibrium wage, | people are unemployed. c. If the supply of workers increased, the number of unemployed would: O stay the same as long as the wage is free to quickly adjust. O decrease. O increase.arrow_forwardE1 3. [Employment and Unemployment] Suppose a country has a working-age population of 500people. The demand and supply functions of its labor market are:w=300-0.5L w=60+0.1Lwhere w is the wage, L is the quantity of labor. The labor market has search friction so thatthose that are looking for a job may not immediately find one even when there are openings.Specifically, Assume the number of job matches (i.e. employment) is given by: 0.8L(a) Find the equilibrium wage and the actual number of employed people. Calculate thelabor force participation rate and unemployment rate. (b) The COVID-19 pandemic lowers the labor demand, and the new labor demand becomesw=240-0.5L. Assume that the wage can adjust quickly, find the equilibrium wage and theactual number of employed people during the pandemic. (c) Briefly explain in words, and with a specific example of each, the difference betweenstructural and frictional unemployment.arrow_forwardConsider an economy with two labor markets—onefor manufacturing workers and one for serviceworkers. Suppose initially that neither is unionized.a. If manufacturing workers formed a union, whatwould you expect to happen to the wages andemployment in manufacturing?b. How would these changes in the manufacturinglabor market affect the supply of labor in themarket for service workers? What would happento the equilibrium wage and employment in thislabor market?arrow_forward
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