ne and UNI: 40. The labor market in TA Ville can be described by the following equations: Labor Supp

ne and UNI: 40. The labor market in TA Ville can be described by the following equations: Labor Supply: Ls = 5w Labor Demand: Lp = 110 -0.5w Ls is the quantity of labor supplied; Lp is the quantity of labor demanded; w is wage expressed in dollars per worker. a. Find the equilibrium wage and the equilibrium level of employment. b. Assume that there is a shock to the economy, such that the labor demand curve is now described by the equation: Ld=55 -0.5w. If wages are flexible, what will be the new equilibrium wage and level of employment? Show your work. ne and UNT: c. Now assume that wages are rigid at the level you found in part (a). What will employment be at this rigid wage? How many workers will be unemployed? d. List three reasons explaining how the labor demand could move back to its original position described before the shock in part (a).

 

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