Suppose that for given labour market conditions, worker bargaining power throughout the economy increases. Discuss, using diagrams, what effect this would have on the real wage and levels of unemployment and output in the short run and in the medium run

Suppose that for given labour market conditions, worker bargaining power throughout the economy increases. Discuss, using diagrams, what effect this would have on the real wage and levels of unemployment and output in the short run and in the medium run

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter30: The Labor Market

Section: Chapter Questions

Problem 9E

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While unemployment is highly negatively correlated with the level of economic activity, in the real world it responds with a lag. In other wands, firms do not immediately lay off workers in response to a sales decline. They wait a while before responding. Similarly, firms do not immediately hire workers when sales pick up. What do you think accounts for the lag in response time?
Consider an economy with two labor markets—onefor manufacturing workers and one for serviceworkers. Suppose initially that neither is unionized.a. If manufacturing workers formed a union, whatwould you expect to happen to the wages andemployment in manufacturing?b. How would these changes in the manufacturinglabor market affect the supply of labor in themarket for service workers? What would happento the equilibrium wage and employment in thislabor market?
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the second picture is in continuation of the first. Because the full question was not visible in the first picture