Suppose there are 108 workers in the economy, with overall labour supply LS-108. The labour demand in Sector A is given by LDA=111-1.9WA and labour demand in Sector B is given by Lºg=108-3.6w8- When graphed with the conventional axes, the slope of the aggregate labour demand curve is and its vertical intercept is . Assuming the neoclassical model of perfect competition holds, the competitive wage would be w=$ Suppose sector A unionizes and sets the wage at $30. Sector A will employ A who will spill over into sector B is equal to .There will now be workers. The number of workers previously employed in sector workers employed in sector B. The wage in % and the counterfactual wage is $ sector B will be equal to $ In this economy the union density is If the contract curve is vertical when the wage is set at $30, workers will spill over into sector B and the wage in sector B will be wg=$ If the contract curve is not vertical, but 9 workers decide to wait in unemployment in sector A, the wage in sector B will be wg=$
Suppose there are 108 workers in the economy, with overall labour supply LS-108. The labour demand in Sector A is given by LDA=111-1.9WA and labour demand in Sector B is given by Lºg=108-3.6w8- When graphed with the conventional axes, the slope of the aggregate labour demand curve is and its vertical intercept is . Assuming the neoclassical model of perfect competition holds, the competitive wage would be w=$ Suppose sector A unionizes and sets the wage at $30. Sector A will employ A who will spill over into sector B is equal to .There will now be workers. The number of workers previously employed in sector workers employed in sector B. The wage in % and the counterfactual wage is $ sector B will be equal to $ In this economy the union density is If the contract curve is vertical when the wage is set at $30, workers will spill over into sector B and the wage in sector B will be wg=$ If the contract curve is not vertical, but 9 workers decide to wait in unemployment in sector A, the wage in sector B will be wg=$
Chapter16: Labor Markets
Section: Chapter Questions
Problem 16.12P
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