Consider the effects of a natural disaster like hurricane Katrina on a metropolitan economy. In the initial (prehurricane) equilibrium, total employment in the metropolitan area is 500,000 workers and the daily wage is $100. The price elasticity of supply of labor is 4.0 and the price elasticity of demand for labor is −1.0. Suppose the hurricane reduces labor supply (a horizontal shift of the supply curve) by 100,000 workers. a. Use a supply-demand graph of the urban labor market to show the effects of the hurricane. b. The equilibrium wage [increases, decreases] by percent (to $ ) computed as. . . . c. The equilibrium employment [increases, decreases] by percent (to workers), computed as. . . . d. The reduction in the equilibrium employment is [greater, less] than the initial decrease in labor supply because. .
Consider the effects of a natural disaster like hurricane Katrina on a metropolitan economy. In the initial (prehurricane) equilibrium, total employment in the metropolitan area is 500,000 workers and the daily wage is $100. The
a. Use a supply-demand graph of the urban labor market to show the effects of the hurricane.
b. The equilibrium wage [increases, decreases] by percent (to $ ) computed as. . . .
c. The equilibrium employment [increases, decreases] by percent (to workers), computed as. . . .
d. The reduction in the equilibrium employment is [greater, less] than the initial decrease in labor supply because. .
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
