1. Determine the original equilibrium. In panel c of the diagram, the intersection of the total demand...
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1. Determine the original equilibrium. In panel c of the diagram, the intersection of the total demand curve, D1, and the total supply curve of labor, S, determines the original equilibrium, e1, where the wage is w1 and total employment is L1. The total demand curve is the horizontal sum of the demand curves in the covered, Dc 1, and uncovered, Du, sectors.
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