Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 7, Problem 4QAP
To determine
Explain the burden of social security taxes in each case and illustrate the two labor market diagrams.
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Assume that the supply of low-skilled workers is fairly elastic, but the employers’ demand for such workers is fairly inelastic. If the policy goal is to expand employment for low-skilled workers, is it better to focus on policy tools to shift the supply of unskilled labor or on tools to shift the demand for unskilled labor? Sketch a graph to help compare and contrast the two options.
Assume that the supply of low-skilled workers is fairly elastic, but the employers’ demand for such workers is fairly inelastic. If the policy goal is to expand employment for low-skilled workers, is it better to focus on policy tools to shift the supply of unskilled labor or on tools to shift the demand for unskilled labor? What if the policy goal is to raise wages for this group? Explain your answers with supply and demand diagrams.
Eric is a stay-at-home parent who lives in New York City and provides math tutoring for extra cash. At a wage of $50 per hour, he is willing to tutor 2 hours per week. At $75 per hour, he is willing to tutor 6 hours per week.
Using the midpoint method, the elasticity of Eric’s labor supply between the wages of $50 and $75 per hour is approximately , which means that Eric’s supply of labor over this wage range is .
Chapter 7 Solutions
Microeconomics
Ch. 7.1 - Prob. 1QCh. 7.1 - Prob. 2QCh. 7.1 - Prob. 3QCh. 7.1 - Prob. 4QCh. 7.1 - Prob. 5QCh. 7.1 - Prob. 6QCh. 7.1 - Prob. 7QCh. 7.1 - Prob. 8QCh. 7.1 - Prob. 9QCh. 7.1 - Prob. 10Q
Ch. 7 - Prob. 1QECh. 7 - Prob. 2QECh. 7 - How is elasticity related to the revenue from a...Ch. 7 - Prob. 4QECh. 7 - Prob. 5QECh. 7 - Prob. 6QECh. 7 - Prob. 7QECh. 7 - Prob. 8QECh. 7 - Prob. 9QECh. 7 - Prob. 10QECh. 7 - Prob. 11QECh. 7 - Prob. 12QECh. 7 - Prob. 13QECh. 7 - Prob. 14QECh. 7 - Prob. 15QECh. 7 - Prob. 16QECh. 7 - Prob. 17QECh. 7 - Prob. 18QECh. 7 - Prob. 19QECh. 7 - Prob. 20QECh. 7 - Prob. 21QECh. 7 - Prob. 22QECh. 7 - Prob. 1QAPCh. 7 - Prob. 2QAPCh. 7 - Prob. 3QAPCh. 7 - Prob. 4QAPCh. 7 - Prob. 5QAPCh. 7 - Prob. 1IPCh. 7 - Prob. 2IPCh. 7 - Prob. 3IPCh. 7 - Prob. 4IPCh. 7 - Prob. 5IPCh. 7 - Prob. 6IP
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- Kyoko is a college student who lives in San Francisco and provides math tutoring for extra cash. At a wage of $20 per hour, she is willing to tutor 7 hours per week. At $35 per hour, she is willing to tutor 10 hours per week. Using the midpoint method, the elasticity of Kyoko’s labor supply between the wages of $20 and $35 per hour is approximately , which means that Kyoko’s supply of labor over this wage range is .arrow_forwardSuppose Hinterland has been a closed economy (meaning there is no immigration from foreign countries and no international trade). The current labor force has 4 million skilled workers and 8 million unskilled workers. Both types of labor have perfectly inelastic supply curves, and the current skilled-unskilled wage ratio is 2.5. The elasticity of demand of skilled labor is -0.4, while the elasticity of demand of unskilled labor is -0.1. Suppose Hinterland allows a brief period of immigration, during which time 1 million skilled workers and 4 million unskilled workers migrate to Hinterland. Suppose there are no other changes to the economy. Approximately what is the new skilled-unskilled wage ratio? (Hint: The percent change in the wage ratio is approximately equal to the percent change in the skilled wage minus the percent change in the unskilled wage.)arrow_forwardSuppose that the demand for a good is described by the inverse demand function p = 10 - 3q and the supply of the good is given by the inverse supply function p = 2 + 2 q: Q: Suppose the government imposes a $1 per unit tax on suppliers. Now what is the price the seller will receive and quantity of the good in this market?arrow_forward
- Consider the market for BP gasoline. If the market has a very elastic supply and a very inelastic demand, how would the burden of a tax on BP gasoline be shared between producers and consumers? Draw a graph to support your answer.arrow_forwardgive an explanation to the following statements: The higher the elasticity of supply in the labor market, the closer would budgetary expenditure be as a proxy for the social cost of a project.arrow_forwardSuppose that the supply of oil is elastic and demand for oil is inelastic. If the government taxes oil, who will bear most of the tax burden?arrow_forward
- A conservative critic of government programs has written Governments know A conservative critic of government programs has written, “Governments know how to do one thing well. They know how to create shortages and surpluses.” Explain this quotation using examples like the minimum wage or interest-rate ceilings. Show graphically that if the demand for unskilled workers is price-elastic, a minimum wage will decrease the total earnings (wage times quantity demanded of labor) of unskilled workers. A conservative critic of government programs has written Governments knowarrow_forwardYakov is a stay-at-home parent who lives in Houston and teaches tennis lessons for extra cash. At a wage of $30 per hour, he is willing to teach 6 hours per week. At $50 per hour, he is willing to teach 16 hours per week. Using the midpoint method, the elasticity of Yakov’s labor supply between the wages of $30 and $50 per hour is approximately _______ , which means that Yakov’s supply of labor over this wage range is _____ .arrow_forwardSuppose that the demand for a good is described by the inverse demand function p = 10 - 3q and the supply of the good is given by the inverse supply function p = 2 + 2 q: Q:Determine the incidence of the tax, who bears what shares of the tax (in percentage)?arrow_forward
- Consider a producer who faces a linear demand curve P = 24 – Q, where P is the price in dollar ($) and Q is the quantity demanded. The producer produces this good at a constant average and marginal cost of $6. Determine the price and quantity if the producer wishes to maximise profits. Suppose the government imposes a tax of $T per unit on the producer. How much will the consumer bear the tax burden? Explain.arrow_forwardThe number of people willing to buy tickets to the Super Bowl is invariably greater than the number of tickets (and seats) available. This is evidence that the price of the tickets is a.equal to the equilibrium price since the number of tickets bought equals the number sold. b.lower than the equilibrium price. c.higher than the equilibrium price. d.higher than the equilibrium price when the demand is inelastic but lower when the demand is elastic.arrow_forward
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