Consider a perfectly competitive labour market, Labour Demand is given by LD = 105 – 5W,...

Consider a perfectly competitive labour market, Labour Demand is given by LD = 105 – 5W, and Labour Supply is given by LS = 10W, where W is the market wage rate. In order to stimulate employment in this industry, the government offers workers an additional $3 for each unit of labour worked. Find the new market equilibrium take-home wage for workers?

A)11

B)8

C)5

D)10

Solutions

Expert Solution

The new labour supply function is L = 10(W+3)

New equilibrium has

10W + 30 = 105 - 5W

15W = 135

W = 11

Therefore the new equilibrium take home wage for workers is $11.

Rahul Sunny answered 1 year ago

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