2. The following linear supply and demand functions represent a post-pandemic market and the potential impact of wages earned by workers: Qd = E-RP Qs = B+ NW + DP (3) (4) where P is the price, W is a variable denoting the post-pandemic average hourly wage, and Q and Q, are the quantity demanded and the quantity supplied. Assume B, D, E, and R all have values greater than zero. (a) What equation (in addition to equations (3) & (4) completes our mathematical model of market equilibrium? (b) Identify the parameters, endogenous variables, and exogenous variables in the supply and demand equations. (c) Derive expressions for the equilibrium market price (P*) and quantity (Q*) and illustrate your answers with a graph. B sure to specify the symbolic values of the supply and demand curves where they intersect with the p-axis and q-axis in the positive quadrant (Assume supply hits the horizontal axis at a positive value). (d) Use calculus to determine the effect of a small increase in hourly wages on the equilibrium price (P*). What is the sign (positive or negative) of the expression you find? Be sure to briefly describe the logic you use to determine whether / is positive or negative.

2. The following linear supply and demand functions represent a post-pandemic market and the potential impact of wages earned by workers: Qd = E-RP Qs = B+ NW + DP (3) (4) where P is the price, W is a variable denoting the post-pandemic average hourly wage, and Q and Q, are the quantity demanded and the quantity supplied. Assume B, D, E, and R all have values greater than zero. (a) What equation (in addition to equations (3) & (4) completes our mathematical model of market equilibrium? (b) Identify the parameters, endogenous variables, and exogenous variables in the supply and demand equations. (c) Derive expressions for the equilibrium market price (P) and quantity (Q) and illustrate your answers with a graph. B sure to specify the symbolic values of the supply and demand curves where they intersect with the p-axis and q-axis in the positive quadrant (Assume supply hits the horizontal axis at a positive value). (d) Use calculus to determine the effect of a small increase in hourly wages on the equilibrium price (P*). What is the sign (positive or negative) of the expression you find? Be sure to briefly describe the logic you use to determine whether / is positive or negative.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.4P

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