Now suppose that labor demand is relatively elastic. Draw the responses to the same negative labor supply shock. Which one has a larger impact on output and price? Explain (briefly). Pt Yt Lt
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Negative supply shock refers to the shocks that decrease the supply due to various factors.
A negative labor supply shock results in a decrease in the supply of labor.
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- A recession caused by a decrease in aggregate demand has caused a decrease in the demand for labor as shown in the graph below. If wages and prices are sticky, then how many units of output are left unsold? Price $30 $18 100 350 1200 Output S D1 DoThe inverse labor demand function is W = 200 – 2L, where W is the wage and L is labor. Labor revenue is WL, and labor supply is W = 2L. (a) Suppose that the labor market is competitive. What is the wage? Employment? (b) Now suppose that a union dominates the labor market. What is the wage? Employment? (c) What do you conclude about the impact of unions on labor markets?Consider the labor market illustrated in the figure to the right. Suppose this market has a unionized sector and a nonunionized sector such that the demand for unionized workers is DU and the demand for nonunionized workers is DNU. Also assume that the supply of unionized and nonunionized labor is fixed at SL. In equilibrium, what is the market wage?
- Please tell me which multiple choice is correct 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 zeroSuppose the supply curve of physicists is given by w =10 + 5E, while the demand curve is given by w = 50 - 3 E. Calculate the equilibrium wage and employment level. Suppose now that the demand for physicists increases to w = 70 - 3 E. Assume the market is subject to cobwebs. Calculate the wage and employment level in each round as the wage and employment levels adjust to the demand shock. (Recall that each round occurs on the demand curve—when the firm posts a wage and hires workers.) What are the new equilibrium wage and employment level?Suppose the supply curve of physicists is given by w=10+5E, while the demand curve is given by w = 50 -3E. Calculate the equilibrium wage and employment level. Suppose now that the demand for physicists increases to w = 70-3E. Assume the market is subject to cobwebs. Calculate the wage and employment level in each round as the wage and employment levels adjust to the demand shock. (Recall that each round occurs on the demand curve - when the firm posts a wage and hires workers). What is the new equilibrium wage and employment level?
- Suppose a firm’s technology requires it to hire 100 workers regardless of the wage level. The firm, however, has found that worker productivity is greatly affected by its wage. The historical relationship between the wage level and the firm’s output is given byWage Rate Units of Output$ 8.00 65$10.00 80$11.25 90$12.00 97$12.50 102What wage level should a profit-maximizing firm choose? What happens to the efficiency wage if there is an increase in the demand for the firm’s output?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?Show the likely effects on price- and/or wage-setting behaviour as reflected in the WS/PS diagram of the following: (a) workers become more worried about losing their jobs at any given level of employment (b) the government intervenes to protect domestic rms from foreign competition. (c) higher social security contributions paid by employers. (d) a reduction in the proportion of employees covered by union wage agreements (e.g. as theresult of a decline in industries in the economy that are heavily unionized)
- c. Other things held constant, suppose that demand for the final product increases. i. Using the labor demand curve D1 as your starting point, what happens to the demand for labor? If the demand for labor increases the demand curve will shift to the right from D1 to D2. ii. What are the new equilibrium wage rate and employment level? d. Assume this industry is dominated by non-union workers. How would the equilibrium wage compare to that earned in a similar industry with similarly skilled union workers? Explain. Answer asapCreate a strong argument to the following prompt. Explain how the labor theory of value developed and changed from Smith, Ricardo, and Marx. Begin by establishing the significance of the labor theory and explain for each thinker individually.how labor market distortions like taxes and firing costs affect employmentin the long run.
