Consider a tropical island economy with only two sectors: souvenir manufacturing and hospitality (hotels). Both sectors are perfectly competitive, and workers are equally able and willing to work in either industry. Only foreign tourists demand souvenirs and hotel stays, so changes in the domestic labor market do not affect the product demand curve in either sector. Suppose a union forms in the souvenir manufacturing industry. The union limits its membership to less than the number of workers employed before the union formed and forces all employers in the industry to hire only union workers. Show the effect of unionization in the souvenir industry on the labor market for souvenir manufacturers. WAGE RATE (Dollars per hour) 12 10 0 Labor Market for Souvenir Manufacturers 0 Labor supply Labor demand 10 20 30 50 QUANTITY OF LABOR (Souvenir manufacturers) Now show the effect of unionization in the souvenir industry on the labor market for hospitality workers. Labor Market for Hospitality Workers Wages Before Unionization After Unionization 60 Labor supply 10 20 30 40 50 QUANTITY OF LABOR (Hospitality workers) Summarize your findings in the following table. Souvenir Industry (Dollars per hour) 6 Labor demand Labor demand Labor supply 60 (?) Hospitality Sector (Dollars per hour) 6 Labor demand Labor supply (?)
Consider a tropical island economy with only two sectors: souvenir manufacturing and hospitality (hotels). Both sectors are perfectly competitive, and workers are equally able and willing to work in either industry. Only foreign tourists demand souvenirs and hotel stays, so changes in the domestic labor market do not affect the product demand curve in either sector. Suppose a union forms in the souvenir manufacturing industry. The union limits its membership to less than the number of workers employed before the union formed and forces all employers in the industry to hire only union workers. Show the effect of unionization in the souvenir industry on the labor market for souvenir manufacturers. WAGE RATE (Dollars per hour) 12 10 0 Labor Market for Souvenir Manufacturers 0 Labor supply Labor demand 10 20 30 50 QUANTITY OF LABOR (Souvenir manufacturers) Now show the effect of unionization in the souvenir industry on the labor market for hospitality workers. Labor Market for Hospitality Workers Wages Before Unionization After Unionization 60 Labor supply 10 20 30 40 50 QUANTITY OF LABOR (Hospitality workers) Summarize your findings in the following table. Souvenir Industry (Dollars per hour) 6 Labor demand Labor demand Labor supply 60 (?) Hospitality Sector (Dollars per hour) 6 Labor demand Labor supply (?)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider a tropical island economy with only two sectors: souvenir manufacturing and hospitality (hotels). Both sectors are perfectly competitive, and
workers are equally able and willing to work in either industry. Only foreign tourists demand souvenirs and hotel stays, so changes in the domestic
labor market do not affect the product demand curve in either sector.
Suppose a union forms in the souvenir manufacturing industry. The union limits its membership to less than the number of workers employed before
the union formed and forces all employers in the industry to hire only union workers.
Show the effect of unionization in the souvenir industry on the labor market for souvenir manufacturers
WAGE RATE (Dollars per hour)
12
10
Labor Market for Souvenir Manufacturers
0
Labor supply
10
20
QUANTITY OF LABOR (Souvenir manufacturers)
30
Labor demand
50
Now show the effect of unionization in the souvenir industry on the labor market for hospitality workers.
Wages
Before Unionization
After Unionization
Labor Market for Hospitality Workers
60
Labor supply
10
20
30
40
50
QUANTITY OF LABOR (Hospitality workers)
Summarize your findings in the following table.
Souvenir Industry
(Dollars per hour)
6
Labor demand
Labor demand
Labor supply
60
(2)
Hospitality Sector
(Dollars per hour)
6
Labor demand
Labor supply
(?)
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