Question

In: Economics

The City of Wichita announces that a major aircraft employer will move to the area. This...

  1. The City of Wichita announces that a major aircraft employer will move to the area. This will cause the creation of jobs amounting to 2% of the current labor force. Using the formulas for analyzing the effects of an increase in labor demand, estimate the following:
    1. What will happen to the equilibrium wage and employment in the region if the wage elasticity of supply is 1.5 and the wage elasticity of demand is 1.0?
    2. What would be the jobs multiplier in that case, if the initial direct change in employment is 2%?
    3. What would be the effects on equilibrium wage and employment if the wage elasticity of supply were higher, at 2.0?

Solutions

Expert Solution

a) The elasticity of labor demand, Ed = %change in labor demand/%change in wage

Given, Ed = 1.0

Ed = 2% / %change in wage

1 = 2% / %change in wage

therefore, %change in wage = 2%

Equlibrium wage will increase by 2%.

The elasticity of labor supply, Es = %change in labor supply / %change in wage

Given, Es = 1.5

Es = %change in labor supply / 2%

1.5 = %change in labor supply / 2%

therefore, %change in labor supply = 3%

Labor supply will increase by 3%.

Since both labor demand and labor supply will increase in the area, the equilibrium level of employment will increase in the City of Wichita.

b) Job Multiplier = (direct effect + indirect effect) / direct effect

direct effect = 2%

Indirect effect = 0

Job multiplier = 2/2 = 1

Therefore, the job multiplier is equal to 1.

c) The elasticity of labor demand, Ed = %change in labor demand/%change in wage

Given, Ed = 1.0

Ed = 2% / %change in wage

1 = 2% / %change in wage

therefore, %change in wage = 2%

Equlibrium wage will increase by 2%.

The elasticity of labor supply, Es = %change in labor supply / %change in wage

Given, Es = 2

Es = %change in labor supply / 2%

2 = %change in labor supply / 2%

therefore, %change in labor supply = 4%

Labor supply will increase by 4%.

Since both labor demand and labor supply will increase in the area, the equilibrium level of employment will increase in the City of Wichita.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

The City of Omaha announces that a major aircraft employer will move to the area. This...
The City of Omaha announces that a major aircraft employer will move to the area. This will cause the creation of jobs amounting to 2% of the current labor force. Using the formulas for analyzing the effects of an increase in labor demand, estimate the following: a. What will happen to the equilibrium wage and employment in the region if the wage elasticity of supply is 1.5 and the wage elasticity of demand is 1.0? b. What would be the...
Your hospital has been approached by a major employer in your market area to negotiate a...
Your hospital has been approached by a major employer in your market area to negotiate a preferred provider arrangement. The employer is seeking a 25% discount from your current charges. Describe a structure that you might use to summarize the financial implications of this decision. Describe the factors that are critical in this decision.
You are the city manager of a medium sized city in a rural area, around a...
You are the city manager of a medium sized city in a rural area, around a population of 20,000. Your city applied for and received a grant from an organization that will allow you to develop a system of systems approach to the regional solid waste issues. What would be your approach? Look at how you could improve recycling, gain energy from the collected resources, reduce the amount of material sequestered into a landfill, and what would you do with...
Assume there is a well-defined geographic area of a city. The area is composed exclusively of...
Assume there is a well-defined geographic area of a city. The area is composed exclusively of apartments and is populated by low-income residents. The people who live in the area tend to stay in that area because                      (1) They cannot afford to live in other areas of the city,                      (2) They prefer to live with people of their own ethnic group, or                      (3) There is discrimination against them in other areas of the city. Rents paid are...
A model aircraft in a wind tunnel with a wing area of 0.9 square meters and...
A model aircraft in a wind tunnel with a wing area of 0.9 square meters and a chord of .24 meters is subject to a sea level standard airflow at 130 m/sec. The zero-lift moment about the center-of-gravity is measured as – 7.8 N m. At a different angle of attack, the moment about the center-of-gravity is measured as 13.5 N m with a lift of 2,650 N. (A)Calculate the value of the moment coefficient about the aerodynamic center, and...
You are assigned by your employer to prospect an area for an extractable material. However, in...
You are assigned by your employer to prospect an area for an extractable material. However, in the course of your work, you discover no such object material but some other valuable material which your employer is not interested. On the other hand, the information which you have is of great importance to another company. As an engineer can you release the particular information which you have to the other party so that the other valuable material may be explored? Demonstrate...
The Boeing Company, headquartered in Chicago, Illinois, is one of the two major producers of aircraft...
The Boeing Company, headquartered in Chicago, Illinois, is one of the two major producers of aircraft in the global market. The other major producer is European Airbus. Boeing produces three models in Everett, Washington: 747s, 767s, and 777s. The planes are all produced in the same building. At any one time, there may be as many as six planes in various stages of production. Obviously the building has to be fairly large to accommodate such a huge undertaking. In fact,...
The City of Sweetwater maintains an Employees’ Retirement Fund, a single employer defined benefit plan that...
The City of Sweetwater maintains an Employees’ Retirement Fund, a single employer defined benefit plan that provides annuity and disability benefits. The fund is financed by actuarially determined contributions from the city’s General Fund and by contributions from employees. Administration of the retirement fund is handled by General Fund employees, and the retirement fund does not bear any administrative expenses. The Statement of Fiduciary Net Position for the Employees’ Retirement Fund as of July 1, 2016, is shown here: CITY...
The City of Sweetwater maintains an Employees’ Retirement Fund, a single employer defined benefit plan that...
The City of Sweetwater maintains an Employees’ Retirement Fund, a single employer defined benefit plan that provides annuity and disability benefits. The fund is financed by actuarially determined contributions from the city’s General Fund and by contributions from employees. Administration of the retirement fund is handled by General Fund employees, and the retirement fund does not bear any administrative expenses. The Statement of Fiduciary Net Position for the Employees’ Retirement Fund as of July 1, 2016, is shown here: City...
Suppose that you are interested in purchasing a house in a particular area of a city...
Suppose that you are interested in purchasing a house in a particular area of a city and are inter- ested in the average size of the homes in that area. In a random sample of 200 homes, you find a sample mean of 2127.94 square feet and a standard deviation of 387.276 square feet. Further- more, you calculated a 99% confidence interval for the true mean size to be (2056.72, 2199.16). Why is it unnecessary to check for normality in...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT