Question

Consider a perfectly competitive labor market in which the demand for labor is given by E = 24,000 – (2,000/3)W, and the supply of labor is given by E = –8,000 + 2,000W. In these equations, E is the number of employee-hours per day, and W is the hourly wage.
What is the equilibrium number of employee-hours each day?

Answer 1

Answer:

The equilibrium number of employee-hours each day=20,000

Explanation:

The equilibrium number of employee-hours each day is the point where the demand for labor is equals the supply of labor. This can be expressed as;

demand for labor=supply of labor

where;

Demand for labor=24,000-(2,000/3)W

Supply of labor=8,000+2,000W

replacing;

24,000-(2,000/3)W=8,000+2,000W

collect like terms;

24,000-8,000=2,000W+(2,000/3)W

16,000=(8,000/3)W

W=(16,000×3)/8,000

W=6

The equilibrium hourly wage=6

replacing in;

E=24,000-(2,000/3)W

E=24,000-(2,000/3)6

E=24,000-4,000=20,000

The equilibrium number of employee-hours each day=20,000