In: Economics
28. Using a neoclassical price adjustment framework, explain what effects this would have in the most affected industries.
Neoclassical method will be based on supply and demand in setting the price of the labor ,the supply curve of the labor will shift leftward and the demand will remain as constant as was before reduction of labor supply and the wage demanded by the current supply curve would be higher.
29. Suppose that this results in a decline in the rate of profit in the most affected industries. Using the capital adjustment mechanism, explain what is likely to happen (and why) in the most affected industries.
Decrease in Labor supply will increase the labor cost and decrease the profit levels of the company,and to adjust to this phenomenon companies no longer may be profitable at current level of output due to increase costs,so the firm may decide to cut the output level to match the decreased supply of labor.
30. What are the chief factors determining the size of the mark-up ratio for an industry?
Markup ratio is the premium which the manufacturers charge for the product an increase in the markup ratio will transfer wealth to the capitalist.If the product is of high demand then industry/company will increase the markup ratio of the product.
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