(9.3) This exercise considers a labor market described by the following wage-setting (WS) and price-setting (PS) relations: WS: W = P × (1 – Vu) × z PS : P= (1+ m) × W, with z = 1 and m = (a) Calculate the equilibrium real wage P W and the natural rate of unemployment Plot the WS and PS relations in (u, W)-space.
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- E1 3. [Employment and Unemployment] Suppose a country has a working-age population of 500people. The demand and supply functions of its labor market are:w=300-0.5L w=60+0.1Lwhere w is the wage, L is the quantity of labor. The labor market has search friction so thatthose that are looking for a job may not immediately find one even when there are openings.Specifically, Assume the number of job matches (i.e. employment) is given by: 0.8L(a) Find the equilibrium wage and the actual number of employed people. Calculate thelabor force participation rate and unemployment rate. (b) The COVID-19 pandemic lowers the labor demand, and the new labor demand becomesw=240-0.5L. Assume that the wage can adjust quickly, find the equilibrium wage and theactual number of employed people during the pandemic. (c) Briefly explain in words, and with a specific example of each, the difference betweenstructural and frictional unemployment.Scenario 1 Suppose the marginal product of labor in the economy is given by MPN-200-0.5N, while the supply of labor is 300+8w Refer to Scenario 1. What is the market clearing real wage? Ow=5 Ow-11 Ow-10 Ow-15Consider an economy in which the marginal product of labour is given by MPN = A(150 − N), where N is the amount of labor used. The amount of labour supplied is given by 60 + 5(1 − t)w, where w is the real wage and t is the tax rate on labour income. (a) Suppose A = 2 and t = 20%. Calculate the equilibrium levels of real wage and employment. (b) Suppose that the economy experiences an adverse supply shock and A = 1. Everything else remains the same as before. Calculate the equilibrium levels of real wage and employment in this case. (c) Suppose that the government lowers the labour income tax by 50% following the adverse supply shock, i.e., A = 1 and t = 10%. Calculate the equilibrium levels of real wage and employment in this case. (d) Use the labour market diagram to illustrate the adjustments from the original equilibrium in part (a) to the equilibrium in part (b) and then the adjustments from the equilibrium in part (b) to the equilibrium in part (c). Explain the adjustments from…
- Consider the labour market represented in the following graph: real wage W P equilibrium employment WS PS Employment rate Where WS represents the Wage Setting relationship, and PS represents the Price Setting relationship. Which of the following statements are INCORRECT? Changes in the marginal product of labour will change the equilibrium level of unemployment because it makes the wage setting (WS) curve shift. A non-labour related increase in cost of production, will shift the PS curve downwards. The PS curve is horizontal because changes in prices do not affect the rate employment in the economy. A positive demand shock that increases actual output will move the equilibrium employment to the right of the point E in the graph.Derive the price-setting curve . What does the equation for the PS curve tell us about the ability of firms to make supernormal profits?. Explain in words why the decision of firms about what price to set has implications for the real wage in the economy. Provide two different explanations for why the PS curve might be flat .In a consumption-leisure model, where P is the price of consumption and w is the wageand h is the hours, how do I mathematically calculate the effect of wage jncrease (wage/price of good) on the ff: >consumption>leisure>hours worked How do I know which is stronger between income effect and substitution effect due to increase in w/p? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
- Consider a Sraffa system that describes production with a surplus. Assume that the whole of the wage is variable. The number of commodities in the system is "n". Some are non-basic commodities. . Write the price equations in matrix notation. (Make sure to mention the dimensions of the vectors and matrix in your equation). . Explain the economic meaning of the A matrix and l vector.Please adjust the graph to show the impact of a recession, where the theoretical market equilibrium wage rate falls to $10/h. Then, answer the two questions assuming wages are sticky downward. Wage rate (per hour) 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2 0 0 S 1 2/ D 6 7 8 9 10 11 12 13 14 15 2 3 4 5 Labor quantity (in millions of workers) increase or decrease in unemployment After the effects of the recession are felt, what is the size of the increase or decrease in unemployment? S = What is the actual wage rate that predominates in the market? million people(Problem 1, Page 437) A firm identifies the following relationship between the real wage it pays and the effort exerted by its workers: Real Wage 8 10 12 14 16 18 The marginal product of labor for this firm is MPN = E(100-N)/15 Effort 7 10 15 17 19 20 where E is the effort level and N is the number of workers employed. If the firm can pay only one of the six wage levels shown, which should it choose? How many workers will it employ? There are 200 workers in the town where the firm is located, all willing to work at a real wage of 8. Does this fact change your answer to the first part of this question? If so, how?
- True or false: Equilibrium employment is given by the intersection of the wage and the profit curves) Suppose there are two inputs in the production function-labor and capitaland that these two inputs are perfect substitutes. Suppose that the price of capital is 750 GHC per machine per week and that the weekly salary of each . worker is 300 GHC . i) Draw the isocost line ii) With the aid of a graph, explain the effect of a wage decrease on flrm-level employment and output holding initial cost ouday constant.1) Suppose the marginal product of labor in the economy is given by MPN = 0.005(18,000 005N), while the supply of labor is 2000 rate and level of employment. (b) What happens to the wage rate and employment if wealth rises, reducing the supply of labor to 200 + 1000w? + 1000w. (a) Find the market-clearing real wage