a)
To analyze the equilibrium level of wage rate and number of labors employed.
a)
Explanation of Solution
Given:
Supply of labor:
At equilibrium,
Substituting the value of w in supply equation we get,
Thus, at equilibrium
b)
To analyze the amount of subsidy and the new equilibrium level of employment after subsidy.
b)
Explanation of Solution
New equilibrium wage that government wishes to rise is $4.
Hence,
Now,
To compute new equilibrium wage,
At new equilibrium,
Hence,
Similarly,
c)
To analyze the number of labors demanded at the wage $4 and
c)
Explanation of Solution
Given:
To compute the number of labors demanded at $4 we will substitute the value of w as $4 in demand equation,
Similarly, the number of labors supplied at wage $4 can be computed by substituting the value of $4 in supply equation,
At wage rate of $4, 250 labors are demanded, and 400 labors are available. Therefore, unemployment can be computed as:
d)
To draw the graph of the above situations.
d)
Explanation of Solution
When the government gives subsidy, the demand curve for the labor will shift to the right because the firms will be more willing to hire labors. The diagram below shows the effect of subsidy on the demand curve for labor.
In the diagram initial equilibrium is at point E1 where, the wage rate is $3 and number of labors employed is 300. When the government gives subsidy, the demand for labor shifts to the right due to which the equilibrium shifts to E2 and the number of labors employed rises to 334.
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Chapter 13 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
- Walmart employs the majority of people in small rural town. It's demand for labor is given by QD=100-2P. The supply of labor is given by Qs=3P. ✓ people would be If the labor market functioned as a competitive market, the wage rate (the price of labor) would be employed, and the producer surplus would be Because Walmart faces little competition for workers, it decides to offer the wage that maximizes consumer surplus (the monopsonist price). This wage is ✓being employed. The producer surplus is now ✓. Note: don't worry if the number of ✓, which results in workers is not an integer.arrow_forwardThe following graph shows the labor market for research assistants in the fictional country of Collegia. The equilibrium wage is $10 per hour, and the equilibrium number of research assistants is 200. Suppose the government has decided to institute a $4-per-hour payroll tax on research assistants and is trying to determine whether the tax should be levied on the employer, the workers, or both (such that half the tax is collected from each side). Use the graph input tool to evaluate these three proposals. Entering a number into the Tax Levied on Employers field (initially set at zero dollars per hour) shifts the demand curve down by the amount you enter, and entering a number into the Tax Levied on Workers field (initially set at zero dollars per hour) shifts the supply curve up by the amount you enter. To determine the before-tax wage for each tax proposal, adjust the amount in the Wage field until the quantity of labor supplied equals the quantity of labor demanded. You will not be…arrow_forwardGraph Input Tool (? Market for Labor in the Fast Food Industry 20 I Wage (Dollars per hour) 18 6. 16 Labor Demanded (Thousands of workers) Labor Supplied (Thousands of workers) Supply 232 14 12 10 Demand 4 40 80 120 160 200 240 280 320 360 400 LABOR (Thousands of workers) WAGE (Dollars per hour)arrow_forward
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