EBK PRINCIPLES OF MACROECONOMICS
12th Edition
ISBN: 9780134079592
Author: Oster
Publisher: YUZU
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Chapter 13, Problem 4.4P
To determine
Impact of social and implicit contracts on sticky wages.
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Assume that the economy is in a recession and demand for labor is falling. Assume that wages are sticky.
Draw a supply and demand graph that represents the labor market. Draw a graph that depicts what has happened to our demand and supply curves in the labor market, including our new equilibrium price and quantity of labor. Will the market experience an increase or a decrease in unemployment?
Make sure you clearly label your graph, all of its components, and any curve shifts are clearly marked with the beginning and ending curves (you can use 0 and 1 or 1 and 2 to designate the first and the second curves).
Explain how the changes in wages can affect equilibrium.
Assume that the economy is in a recession and demand for labor is falling. Assume that wages are sticky.
Draw a supply and demand graph that represents the labor market. Draw a graph that depicts what has happened to our demand and supply curves in the labor market, including our new equilibrium price and quantity of labor. Will the market experience an increase or a decrease in unemployment?
Chapter 13 Solutions
EBK PRINCIPLES OF MACROECONOMICS
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- Draw a supply and demand graph that represents the labor market. Now, assume that the baby boomer generation is retiring. What happens to our supply and demand curves? What is the new point of equilibrium? Will the market experience an increase or a decrease in unemployment?arrow_forwardwhat are the factors that will lead to an increase in demand for workers in an economy?arrow_forwardWhy do minimum wage laws cause unemployment? Explain, using a supply anddemand diagram.arrow_forward
- What is the difference between factor cost and market price? According to macro economics?arrow_forwardHow does the amount of unemployment created by an increase in the minimum wage depend on the elasticity of labor demand? Do you think an increase in the minimum wage will have a greater unemployment effect in the fast-food industry or in the lawn-care/landscaping industry?arrow_forwardWhat are the causes of inflexible or sticky wagesarrow_forward
- Suppose that quantum computers, which are much faster than computers today, are invented and that firms want to employ these computers at the work place. Unfortunately, not just anyone can operate a quantum computer; it requires a lot human capital. Use your knowledge of the supply and demand for unskilled and skilled labor to: 1. Draw a graph of the unskilled and skilled labor 2. Show the effect on wages in these markets. 3. Upload an image of your graph to this question.arrow_forwardIn a particular industry, labor supply is ES = 10 + w and labor demand is ED = 40 - 4w, where E is the level of employment and w is the hourly wage. a. What are the equilibrium wage and employment if the labor market is competitive? What is the unemployment rate? b. Suppose the government sets a minimum hourly wage of $8. How many workers would lose their jobs? How many additional workers would want a job at the minimum wage? What is the unemployment rate?arrow_forwardHow do you find the price index for macroeconomics?arrow_forward
- While economists measure unemployment at the macroeconomic level, microeconomic forces are often responsible for this macro aggregate. In other words, the tie between microeconomics and macroeconomics is inevitable when discussing the level of unemployment in an economy. Suppose the following graph represents the market for unskilled labor in a fictional economy. These workers typically represent the young, inexperienced, or uneducated part of the labor force and are therefore most effected by changes in the unemployment rate. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this grapharrow_forwardIn the short run, the quantity of output that firms supply can deviate from the natural level of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen. For example, the sticky-wage theory asserts that output prices adjust more quickly to changes in the price level than wages do, in part because of long-term wage contracts. Suppose a firm signs a contract agreeing to pay its workers $15 per hour for the next year, based on an expected price and the wages the firm pays its level of 100. If the actual price level turns out to be 110, the firm's output prices will ▼ the quantity of workers will remain fixed at the contracted level. The firm will respond to the unexpected increase in the price level by output it supplies. If many firms face similarly rigid wage contracts, the unexpected increase in the price level causes the quantity of output supplied the natural level of output in the short run. to Suppose…arrow_forwardHow do wages affect labor supply?arrow_forward
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