Ld = 100- 5W
Ls = 5W
(a) At competitive equilibrium Ld= Ls, we get :
100-5W =5W
100= 10W
W = $10
L= 5(10)= 50 thousand
Therefore, the competitive market equilibrium wage is $10 per hour.
And the competitive market equilibrium quantity of labor is 50 thousand workers.
(b) New labor demand , Ld =120-5W
Now, equate new labor demand and labor supply , we get :
120- 5W = 5W
120= 10W
W = $12
L= 5(12)= 60 thousand
Therefore, the new equilibrium wage is $12 per hour.
And the new competitive market equilibrium quantity of labor is 60 thousand workers.
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