Assume that you are studying a perfectly competitive labour market. The demand for labour is given...

Assume that you are studying a perfectly competitive labour market.

The demand for labour is given by W = 200 – L

The supply for labour is given by W = 100 + L

a) Calculate the wage rate in the market and illustrate in a diagram.

b) If the wages becomes W = 175, what will happen in the market? Explain how the

equilibrium will be reached and illustrate in a diagram.

c) If the wages becomes W = 125, what will happen in the market? Explain how the

equilibrium will be reached and illustrate in a diagram.

d) If the government puts a minimum wage of W = 190, what will happen in the market?

Solutions

Expert Solution

Rahul Sunny answered 1 month ago

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