5.12. The analysis of Case 1 in Section 5.4 assumes that employment is determined by labor demand. A more realistic assumption may be that employment at a given real wage equals the minimum of demand and supply; this is known as the short-side rule.

(a) Draw diagrams showing the situation in the labor market under this as- sumption when (i) P is at the level that generates the maximum possible output. (11) P is above the level that generates the maximum possible output.

(b) With this assumption, what does the aggregate supply curve look like?