Question

The table below shows the quantity demanded and supplied in the labor market for economics professors at the I'MaState University, where all the professors belong to a union.

Annual Salary

Quantity of workers demanded

Quantity of workers supplied

$50,000

95

20

$60,000

80

30

$70,000

65

40

$80,000

50

50

$90,000

35

60

$100,000

20

70

1. If no union existed, the equilibrium salary for economics professors at I'MaState University, will be .

2. If the union has enough negotiating power to raise the annual salary by $20,000 more than a non-unionized university would be willing to pay, then there will be excess of labor of economics professors at I'MaState University.

3. Economics professors and economic consultants are perfect substitutes. If the union negotiates an annual salary increase for economics professors at I'MaState University that is $20,000 higher than the market wage rate for economic consultants, then the of economic consultants will . This will result in the market wage rate for economic consulting positions to and the quantity of economic consultants employed to

Answer 1

1.  If no union existed, the equilibrium salary for economics professors at I'MaState University, will be .

$80000 where demand for labor is 50 and supply for labor is 50

2. If the union has enough negotiating power to raise the annual salary by $20,000 more than a non-unionized university would be willing to pay, then there will be excess of labor of economics professors at I'MaState University.

equilibrium wage $80000 labor = 50 (demand and supply)

now if $20,000 is raise , it will reach 100,000 where demand is 20 and supply is 70, so excess supply of labor = 70- 20= 50 labor

3.

If the union negotiates an annual salary increase for economics professors at I'MaState University that is $20,000 higher than the market wage rate for economic consultants, then the of economic consultants will . This will result in the market wage rate for economic consulting positions to fall and the quantity of economic consultants employed to rise.

reason fall in wage rate leads to demand for economic consultant and firm will employed them in higher quantity for work.