Assume the market demand curve is D1, the market supply curve is S and equilibrium is at E. Now the market wage rate paid to truck drivers increases from R250 to R300. Identify the type of disequilibrium that will result from such a wage increase. Determine the size of the disequilibrium that will result from an increase in the wage rate from R250 to R300. Assume market equilibrium is at E1 at the intersection of D1 and S. Now the demand curve shifts from D1 to D2 on the graph. Identify any three factors that could result in this increase in the demand for truck drivers.

Assume the market demand curve is D1, the market supply curve is S and equilibrium is at E. Now the market wage rate paid to truck drivers increases from R250 to R300. Identify the type of disequilibrium that will result from such a wage increase. Determine the size of the disequilibrium that will result from an increase in the wage rate from R250 to R300. Assume market equilibrium is at E1 at the intersection of D1 and S. Now the demand curve shifts from D1 to D2 on the graph. Identify any three factors that could result in this increase in the demand for truck drivers.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter16: The Markets For Labor, Capital, And Land

Section: Chapter Questions

Problem 11P

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Consider a worker/consumer with non-labor income, V, of 2 dollars. Time endowment is T=24 and denotes labor supply by h. Suppose the hourly wage is 5, and the consumption good's price is 1. Suppose that the optimal labor supply (given the prices) is h*=8. Suppose that the worker is offered the following contract: For every one of the first 8 hours, the wage per hour is 5. If the worker chooses to work for more than 8 hours the wage rate is 10 for each extra hour (above 8). A new graph depicts the budget set. Can you determine how labor supply changes? (comparing it to the case in which the wage rate is fixed at 5 dollars per hour)..
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In a purely competitive labor market (a), market labor supply S and market labor demand D determine the equilibrium wage rate Wc and the equilibrium number of workers Qc . Each individual competitive firm (b) takes this competitive wage Wc as given. Thus, the individual firm’s labor supply curve s = MRC is perfectly elastic at the going wage Wc . Its labor demand curve, d, is its MRP curve (here labeled mrp). The firm maximizes its profit by hiring workers up to where MRP = MRC. Area 0abc represents both the firm’s total revenue and its total cost. The green area is its total wage cost; the blue area is its nonlabor costs, including a normal profit—that is, the firm’s payments to the suppliers of land, capital, and entrepreneurship. The supply-of-labor curve S slopes upward in graph (a) because: a. the law of diminishing marginal utility applies. b. the law of diminishing returns applies. c. workers can afford to “buy” more leisure when the wage rate increases. d. higher wages are…
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