Question 1: Suppose that we are in the labour market. Labour is used as an input in the production of an output (Q), which sells at a price (p). However, a firm that uses this labour (L) needs to pay them the wage rate per unit (w). Labour is supplied by workers according to the Labour Supply curve: Lg=W-13 The Marginal Product of Labour (MPL) is given by: MPL = 20 - L Finally, the final price for the product (p) is $10. a) What is the total employment and wage rate in the labour market equilibrium (w* & L")? L' = 17; w = $30 Now suppose that the demand for the final product decreases and this reduces the price by $4. b) How does this change in p affect the equilibrium wage rate? New w* = $26.40
Question 1: Suppose that we are in the labour market. Labour is used as an input in the production of an output (Q), which sells at a price (p). However, a firm that uses this labour (L) needs to pay them the wage rate per unit (w). Labour is supplied by workers according to the Labour Supply curve: Lg=W-13 The Marginal Product of Labour (MPL) is given by: MPL = 20 - L Finally, the final price for the product (p) is $10. a) What is the total employment and wage rate in the labour market equilibrium (w* & L")? L' = 17; w = $30 Now suppose that the demand for the final product decreases and this reduces the price by $4. b) How does this change in p affect the equilibrium wage rate? New w* = $26.40
Chapter1: Making Economics Decisions
Section: Chapter Questions
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![Question 1:
Suppose that we are in the labour market. Labour is used as an input in the production of an
output (Q), which sells at a price (p). However, a firm that uses this labour (L) needs to pay
them the wage rate per unit (w).
Labour is supplied by workers according to the Labour Supply curve:
Ls=w - 13
The Marginal Product of Labour (MPL) is given by:
MPL = 20 - L
Finally, the final price for the product (p) is $10.
a) What is the total employment and wage rate in the labour market equilibrium (w* &
L*)?
L' = 17; w' = $30
Now suppose that the demand for the final product decreases and this reduces the price by $4.
b) How does this change in p affect the equilibrium wage rate?
New w* = $26.40](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffa29ff1d-6208-4d8d-bb7c-ff2fb224b7a5%2F39687df1-32b4-401f-852b-ae8cc7c6becf%2Ff65tgpu_processed.png&w=3840&q=75)
Transcribed Image Text:Question 1:
Suppose that we are in the labour market. Labour is used as an input in the production of an
output (Q), which sells at a price (p). However, a firm that uses this labour (L) needs to pay
them the wage rate per unit (w).
Labour is supplied by workers according to the Labour Supply curve:
Ls=w - 13
The Marginal Product of Labour (MPL) is given by:
MPL = 20 - L
Finally, the final price for the product (p) is $10.
a) What is the total employment and wage rate in the labour market equilibrium (w* &
L*)?
L' = 17; w' = $30
Now suppose that the demand for the final product decreases and this reduces the price by $4.
b) How does this change in p affect the equilibrium wage rate?
New w* = $26.40
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