Question

In an economy, the demand for labor is given by the equation W = 15 - (1/200) L and the supply of labor is given by the equation W = 5 + (1/200) L, where W is the wage rate and L is the quantity of labor. In this economy, the equilibrium wage rate is _____ and the equilibrium quantity of labor is _____ workers.

Answer 1

Answer:

the equilibrium wage rate is 10  and the equilibrium quantity of labor is 1000 workers

Explanation:

The equilibrium wage rate and the equilibrium quantity of labor are found as the point where the equation of demand intercepts the equation of supply, so the equilibrium quantity of labor is:

$W_{Demand} = W_{Supply}$

15 - (1/200) L = 5 + (1/200) L

15 - 5 =  (1/200) L +  (1/200) L

10 = (2/200) L

(10*200)/2 = L

1000 = L

Then, the equilibrium wage rate is calculated using either the equation of demand for labor or the equation of supply of labor. If we use the equation of demand for labor, we get:

W = 15 - (1/200) L

W = 15 - (1/200) 1000

W = 10

Finally, the equilibrium wage rate is 10 and the equilibrium quantity of labor is 1000 workers