This question explores how a wage subsidy like the EITC impacts the labor market. Suppose that labor demand is described by w = 17 – 2L and labor supply is described by Ls = w - 5. Find the equilibrium wage. The exact size of the EITC varies from state and state and depends on how many children you have but on average it pays about $3/hour extra on top of the market wage. You can model this like a tax so the wage in the supply curve is now $3 more than the wage in the demand curve. In equilibrium, how much do employees get paid per hour (in total)?

This question explores how a wage subsidy like the EITC impacts the labor market. Suppose that labor demand is described by w = 17 – 2L and labor supply is described by Ls = w - 5. Find the equilibrium wage. The exact size of the EITC varies from state and state and depends on how many children you have but on average it pays about $3/hour extra on top of the market wage. You can model this like a tax so the wage in the supply curve is now $3 more than the wage in the demand curve. In equilibrium, how much do employees get paid per hour (in total)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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