Question

A. If a wage of $10.25 were to be imposed on this market, such that the market was not longer strictly competitive, what would be the value for labor supply?
b. At the imposed wage of $10.25 what would be the value for labor demand?
c. Provide a properly labeled and appropriately articulated Labor Market Model given the labor supply and demand equations provided and the imposed wage of $10.25.
d. Based on the labor market model you’ve now illustrated, how would you describe the current condition of this market given the imposed wage?

Answer 1

Solution :

Given the wage = $ 10.25 that is to be imposed to the market.

Given equation :

$L_D$ = 500 – 45W and $L_S$ = -200 + 25W

If the wage of $10.25 is to be imposed to the market, the value of the labor supply can be found by putting the value of the wage in the labor supply equation.

At W = 10.25

Putting this value in the above equation, the labor supply would be

$L_S$ = -200 + 25W

$L_S$ = -200 + 25(10.25)

     = 56.25

When W = 10.25, the value for the labor demand can be found by :

$L_D$ = 500 – 45W

$L_D$ = 500 – 45(10.25)

$L_D$ = 500 – 461.25

$L_D$ = 38.75

Therefore, the labor demand and the labor supply model is

$L_D$ = 400 - 45 x 10.25

$L_S$ = -200 + 25 x 10.25