Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 28, Problem 4.4P
To determine
Impact of social and implicit contracts on sticky wages.
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Draw a supply and demand graph that represents the labor market. Now, assume that the economy is in a recession and demand for labor is falling. Assume that wages are sticky. What happens to our supply and demand curves? What is the new point of equilibrium? Will the market experience an increase or a decrease in unemployment?
Explain how the changes in wages can affect equilibrium.
Assume that wages are sticky in a downward direction. Show with the use of a graph what will happen when there is a decrease in labor demand. Label the graph properly.
Chapter 28 Solutions
Principles of Economics (12th Edition)
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- What are the causes of inflexible or sticky wagesarrow_forwardHow does the amount of unemployment created by an increase in the minimum wage depend on the elasticity of labor demand? Do you think an increase in the minimum wage will have a greater unemployment effect in the fast-food industry or in the lawn-care/landscaping industry?arrow_forwardThe government recently imposed a number of regulations on companies that will make it more expensive for companies to hire workers. What consequence will this have on the labor market?arrow_forward
- Name some factors that can cause a shift in the demand curve in labor markets.arrow_forwardThe accompanying graph shows the labor market in the country of Harmonia. Assume that the Harmonia labor market is in equilibrium the Harmonian government decides to enact a minimum wage of $6.A. Show the new minimum wage on the graph by shifting the minimum wage line. B. What is the increase in unemployment as a result of the minimum wage?C. Which type of unemployment is affected by the new minimum wage?arrow_forwardConsider the labor market defined by the supply and demand curves plotted on the following graph. Use the calculator to help you answer the following questions. You will not be graded on any changes you make to the calculator. WAGE (Dollars per hour) 20.0 17.5 Supply 15.0 12.5 10.0 7.5 5.0 2.5 + 0 0. Demand 125 250 375 500 625 750 875 1000 LABOR (Thousands of workers). Graph Input Tool Market for Labor Wage (Dollars per hour) Labor Demanded (Thousands of workers) 2.50 875 Labor Supplied (Thousands of workers) 125arrow_forward
- Suppose that quantum computers, which are much faster than computers today, are invented and that firms want to employ these computers at the work place. Unfortunately, not just anyone can operate a quantum computer; it requires a lot human capital. Use your knowledge of the supply and demand for unskilled and skilled labor to: 1. Draw a graph of the unskilled and skilled labor 2. Show the effect on wages in these markets. 3. Upload an image of your graph to this question.arrow_forwardHow do you find the price index for macroeconomics?arrow_forwardWhile economists measure unemployment at the macroeconomic level, microeconomic forces are often responsible for this macro aggregate. In other words, the tie between microeconomics and macroeconomics is inevitable when discussing the level of unemployment in an economy. Suppose the following graph represents the market for unskilled labor in a fictional economy. These workers typically represent the young, inexperienced, or uneducated part of the labor force and are therefore most effected by changes in the unemployment rate. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this grapharrow_forward
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