Classifying the goods as elastic and inelastic.

Question

As indicated in the attached image, U.S. earnings for high- and low-skill workers as measured by educational attainment began diverging in the 1980s. The remaining questions in this problem set use the model for the labor market developed in class to walk through potential explanations for this trend. 1. Assume that there are just two types of workers, low- and high-skill. As a result, there are two labor markets: supply and demand for low-skill workers and supply and demand for high-skill workers. Using two carefully drawn labor-market figures, show that an increase in the demand for high skill workers can explain an increase in the relative wage of high-skill workers. 2. Using the same assumptions as in the previous question, use two carefully drawn labor-market figures to show that an increase in the supply of low-skill workers can explain an increase in the relative wage of high-skill workers.

Answer 1

Question

Chapter 5, Problem 1PA

Subpart (a):

To determine

Classifying the goods as elastic and inelastic.

Subpart (b):

To determine

Classifying the goods as elastic and inelastic.

Subpart (c):

To determine

Classifying the goods as elastic and inelastic.

Subpart (d):

To determine

Classifying the goods as elastic and inelastic.

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As indicated in the attached image, U.S. earnings for high- and low-skill workers as measured by educational attainment began diverging in the 1980s. The remaining questions in this problem set use the model for the labor market developed in class to walk through potential explanations for this trend. 1. Assume that there are just two types of workers, low- and high-skill. As a result, there are two labor markets: supply and demand for low-skill workers and supply and demand for high-skill workers. Using two carefully drawn labor-market figures, show that an increase in the demand for high skill workers can explain an increase in the relative wage of high-skill workers. 2. Using the same assumptions as in the previous question, use two carefully drawn labor-market figures to show that an increase in the supply of low-skill workers can explain an increase in the relative wage of high-skill workers.

Published in 1980, the book Free to Choose discusses how economists Milton Friedman and Rose Friedman proposed a one-sided view of the benefits of a voucher system. However, there are other economists who disagree about the potential effects of a voucher system.

The following diagram illustrates the demand and marginal revenue curves facing a monopoly in an industry with no economies or diseconomies of scale. In the short and long run, MC = ATC. a. Calculate the values of profit, consumer surplus, and deadweight loss, and illustrate these on the graph. b. Repeat the calculations in part a, but now assume the monopoly is able to practice perfect price discrimination.

Answer 2

Question

Chapter 5, Problem 1PA

Subpart (a):

To determine

Classifying the goods as elastic and inelastic.

Subpart (b):

To determine

Classifying the goods as elastic and inelastic.

Subpart (c):

To determine

Classifying the goods as elastic and inelastic.

Subpart (d):

To determine

Classifying the goods as elastic and inelastic.

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Answer 3

Question

Chapter 5, Problem 1PA

Subpart (a):

To determine

Classifying the goods as elastic and inelastic.

Subpart (b):

To determine

Classifying the goods as elastic and inelastic.

Subpart (c):

To determine

Classifying the goods as elastic and inelastic.

Subpart (d):

To determine

Classifying the goods as elastic and inelastic.

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Answer 4

Question

Chapter 5, Problem 1PA

Subpart (a):

To determine

Classifying the goods as elastic and inelastic.

Subpart (b):

To determine

Classifying the goods as elastic and inelastic.

Subpart (c):

To determine

Classifying the goods as elastic and inelastic.

Subpart (d):

To determine

Classifying the goods as elastic and inelastic.

Expert Solution & Answer

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Answer 5

Chapter 5, Problem 1PA

Subpart (a):

To determine

Classifying the goods as elastic and inelastic.

Subpart (b):

To determine

Classifying the goods as elastic and inelastic.

Subpart (c):

To determine

Classifying the goods as elastic and inelastic.

Subpart (d):

To determine

Classifying the goods as elastic and inelastic.

Answer 6

Chapter 5, Problem 1PA

Subpart (a):

To determine

Classifying the goods as elastic and inelastic.

Answer 7

Chapter 5, Problem 1PA

Subpart (a):

To determine

Classifying the goods as elastic and inelastic.

Answer 8

Subpart (b):

To determine

Classifying the goods as elastic and inelastic.

Answer 9

Subpart (b):

To determine

Classifying the goods as elastic and inelastic.

Answer 10

Subpart (c):

To determine

Classifying the goods as elastic and inelastic.

Answer 11

Subpart (c):

To determine

Classifying the goods as elastic and inelastic.

Answer 12

Subpart (d):

To determine

Classifying the goods as elastic and inelastic.

Answer 13

Subpart (d):

To determine

Classifying the goods as elastic and inelastic.

Answer 14

Expert Solution & Answer

Answer 15

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Answer 16

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Answer 25

Ch. 5.1 - Define the price elasticity of demand. Explain...Ch. 5.2 - Define the price elasticity of supply. Explain...Ch. 5.3 - Prob. 3QQ Ch. 5 - A life-saving medicine without any close...Ch. 5 - The price of a good rises from 8 to 12, and the...Ch. 5 - A linear, downward-sloping demand curve is a....Ch. 5 - Prob. 4CQQ Ch. 5 - An increase in the supply of a good will decrease...Ch. 5 - Over time, technological advance increases...Ch. 5 - Prob. 1QR

Classifying the goods as elastic and inelastic.

Solution Summary: The author explains that Beethoven music recordings have more elastic demand than required notebooks, whereas mystery novels are a luxury good with close substitutes.

Classifying the goods as elastic and inelastic.

Classifying the goods as elastic and inelastic.

Classifying the goods as elastic and inelastic.

Classifying the goods as elastic and inelastic.

Chapter 5 Solutions