In 2018 steel workers in America received the biggest wage increase in six years after long negotiations with the steel companies. Source: Singh, Rajesh Kumar (2018). See link: https://www.reuters.com/article/us-u-S-steel-union-contract- exclusive/exclusive-u-s-steel-workers-set-to-get-biggest-pay- raise-in-years-sources-idUSKCN1MQ2Q3 At the same time the price of aluminium, which is a substitute for steel, has seen a price drop in 2018 selling at below US$2000 a tonne. This is mainly due to increased supply of aluminium from China. Source: Djukanovic, Goran (2018). See link: https://aluminiuminsider.com/aluminium-year-in-review-and- what-to-expect-in-2019/ What are the effects on the equilibrium price and quantity of steel if the wages of steelworkers rise and, simultaneously, the price of aluminium falls? Draw a diagram to support your answer.

In 2018 steel workers in America received the biggest wage increase in six years after long negotiations with the steel companies. Source: Singh, Rajesh Kumar (2018). See link: https://www.reuters.com/article/us-u-S-steel-union-contract- exclusive/exclusive-u-s-steel-workers-set-to-get-biggest-pay- raise-in-years-sources-idUSKCN1MQ2Q3 At the same time the price of aluminium, which is a substitute for steel, has seen a price drop in 2018 selling at below US$2000 a tonne. This is mainly due to increased supply of aluminium from China. Source: Djukanovic, Goran (2018). See link: https://aluminiuminsider.com/aluminium-year-in-review-and- what-to-expect-in-2019/ What are the effects on the equilibrium price and quantity of steel if the wages of steelworkers rise and, simultaneously, the price of aluminium falls? Draw a diagram to support your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that a car factory initially hires 1,600 workers at $20 per hour and that each worker works 40 hours per week. Then the factory unionizes, and the new union demands that wages be raised by 25 percent. The firm accedes to that request in collective bargaining negotiations but then decides to cut the factory’s labor force by 30 percent due to the higher labor costs.
Under the Wagner Act (NLRA), the only time workers are entitled to union representation is when the union has the support of the majority of workers at the workplace. False True
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U.S. labor law protects the right for a group of workers in a given workplace to be represented by more than one union. False True
Use 2-diagrams, one for unionized and the other for non-unionized sector where both markets are initially in equilibrium. Assume that despite an increase in wages in unionized sector, the employment level is fixed in the unionized sector at the initial competitive equilibrium level. What would be the impact of an increase in wages on both sectors in this case? Explain
Now show the effect of unionization in the coal mining sector on the market for wood. PRICE OF WOOD As a result of the unionization: I Supply Demand QUANTITY OF WOOD The price of coal will increase and the price of wood will decrease The price of coal will decrease and the price of wood will decrease The price of coal will decrease and the price of wood will increase The price of coal will increase and the price of wood will increase
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Describe the collective bargaining process
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QUESTION 19 Refer to the following diagram. Wages in both the union and nonunion sectors are initially $10. The union then negotiates a wage rate of $12. The post-negotiation nonunion wage is not yet known. Union $12 $10 S VMP Labor $10 Nonunion VMP Labor The product-market effect would be modeled by shifting the nonunion supply curve to the right, increasing the measured union wage advantage. nonunion demand curve to the right, reducing the measured union wage advantage. Ⓒ union demand curve to the right, increasing the measured union wage advantage. union supply curve to the right, reducing the pure union wage advantage.