Question

Homework (Ch 19) 3. Contrasting labor union laws in two states Consider two states that adopt different laws concerning labor unions. The following graph shows the labor market in a state in the North. Initially, the market-clearing wage is $4 per hour. Suppose that the legislature in this northern state passes laws that make it easy for workers to join a union. Through collective bargaining, the union negotiates a wage of $6 per hour. Use the black point (plus symbol) to show how many union workers will be employed at the $6 wage. (Hint: Be sure to place the point on the appropriate curve.)

Answer 1

In the Northern State at a wage of $6, there is supply of 6 million of workers while demand of 2 million of workers which means 6 million - 2 million = 4 million workers are unemployed at this wage rate.

If that unemployed labor joins Southern state, there would be rise in supply of labor which shift supply curve from AS to AS1. It reduce wage rate from W to W1 and raise quantity of labor from Q to Q1 in Southern State.