In: Economics
Assume that the labour demand equation for a fictional country
is Ld= 30 – w, where w is the
wage per hour worked. Also, assume that the labour supply equation
for that country is Ls= 0.5(w).
Instructions: Round your answers to the nearest
whole number.
a. The equilibrium wage is $__ , and the equilibrium quantity of
labour employed is __ workers.
b. At the equilibrium wage, ___ people are unemployed.
c. If the supply of workers increased, the number of unemployed
would:
stay the same as long as the wage is free to quickly adjust.
decrease.
increase.
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solution
Ld=30-w
Ls=0.5w
so for equilibirum
Ld=Ls
30-w=0.5w
1.5w=30
w=20units
and from labour demand function
Ld=30-20
Ld=10 units
so wage = 20 units
labour employed = 10 units
and at equilibrium wage rate unemployment is zero
and ad labour supply increase the unemployment remain same as long as wages is free to quick adjust