3. Excess supply with union wages Consider the housing construction industry. Assume that the industry is perfectly competitive in both input and output markets. Suppose that, through collective bargaining, a labor union negotiates an industry-wide wage for various kinds of labor (electricians, plumbers, and so on). In particular, it succeeds in negotiating a wage increase for carpenters from $15 to $20 per hour. The following graph shows the labor demand of an individual firm. On the following graph, show what happens at the firm level as a result of the union negotiations. WAGE RATE 30 25 20 15 10 5 0 0 12 36 48 QUANTITY OF LABOR 24 Supply Demand 60 72 Now consider the effects of the wage change on the entire industry. Demand Supply ?
3. Excess supply with union wages Consider the housing construction industry. Assume that the industry is perfectly competitive in both input and output markets. Suppose that, through collective bargaining, a labor union negotiates an industry-wide wage for various kinds of labor (electricians, plumbers, and so on). In particular, it succeeds in negotiating a wage increase for carpenters from $15 to $20 per hour. The following graph shows the labor demand of an individual firm. On the following graph, show what happens at the firm level as a result of the union negotiations. WAGE RATE 30 25 20 15 10 5 0 0 12 36 48 QUANTITY OF LABOR 24 Supply Demand 60 72 Now consider the effects of the wage change on the entire industry. Demand Supply ?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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