Question

The first table below provides the initial demand schedule and supply schedule for the market for labor. You will use this table to identify the initial equilibrium wage and level of employment, as well as the equilibrium wage and level of employment after an increase in the number of available workers. Quantity of Labor Quantity of Labor Wage Demanded Supplied $10 180 hours worked 150 hours worked $12 160 hours worked 160 hours worked $14 140 hours worked 170 hours worked $16 120 hours worked 180 hours worked $18 100 hours worked 190 hours worked $20 80 hours worked 200 hours worked information provided above to identify the effect of this increase on the equilibrium wage rate, level of employment, value of Potential GDP, and worker productivity (defined, here, as potential output per hour worked). Identify and quantify the effect of this increase in the number of available workers on: 1) the equilibrium wage rate, 2) the level of employment, 3) the value of Potential GDP, and 4) the value of worker productivity. Round all answers to the nearest one- hundredth. The table below provides the macroeconomic production function. You will use this table to identify the initial value of Potential GDP, as well as the value of Potential GDP after an increase in the supply of labor. Quantity of Labor Potential GDP 130 hours worked $295 million 140 hours worked $335 million 150 hours worked $370 million 160 hours worked $400 million 170 hours worked $425 million 180 hours worked $445 million 190 hours worked $460 million 200 hours worked $470 million An increase in the number of available workers shifts the labor supply to the right by 30 hours worked. You will use the

Answer 1

The equilibrium wage is where the Quantity of Labor Demanded is equal to the Quantity of Labor Supplied.

This occurs where the wage rate is $12, because here the Quantity of Labor Demanded = Quantity of Labor Supplied which is 160 hours worked.

When there is an increase in the number of available workers which shifts the labor supply to the right by 30 hours worked, the Quantity of labor supplied becomes 160 + 30 = 190 hours and the corresponding labor demanded is 100 hours worked and the wage rate is $18.

The initial value of potential GDP is when there was 160 hours worked by labors and the corresponding potential GDP was $400 million.

The final value of potential GDP is when there was 190 hours worked by labors and the corresponding potential GDP was $460 million.

The effect of this increase in the number of available workers on:

1) The equilibrium wage rate = $18

2) The level of employment = 100 hours worked

3) The value of potential GDP = $460 million

4) The value of worker productivity = Potential GDP/Number of hours worked = $460million/100 = $4.6 Million per labor hour.