In the labor market, employers demand hours of work and workers supply hours of work. You are given the following data about the labor market Demand and Supply curves. Table 1 Number of hours of work (1) Number of hours of work Dollars (1) Dollars (2) (3) 35 10 30 25 10 15 20 10 15 15 20 20 25 30 25 20 15 30 35 25 10 30 Answer the following questions. Justify your answer using the concepts of chapter 2 of the lecture notes. a) Plot the demand curve and supply curve of labour in a diagram. (you need not submit the diagram) Which data columns of Table 1 have you used to plot the demand curve and why Which data columns have you used to plot the supply curve and why? Justify your answer using the concepts of chapter 2 of the lecture notes. b) Suppose that the market wage (price of an hour of work) happens to be $15. i) Is this the equilibrium wage? If not, will the wage, the quantity demanded, and the quantity supplied remain unchanged and why? i) If not, how would the wage, the quantity demanded, and the quantity supplied change? Would they increase or decrease? iii) If they change, who will change the wage? iv) If you answer to question b.i) is no, what is the equilibrium wage and quantity demanded and supplied of labor? c) Recall that the surface of a triangle = (Base * Height) /2). Calculate i) the maximum total net social benefit at the equilibrium. i) Calculate the maximum total profit or total benefit of the employers at the equilibrium i) Calculate the producer's surplus (= workers' surplus) at the equilibrium wage at the equilibrium. iv) How much is the difference between the marginal social benefit and the marginal social cost at the equilibrium? d) How does the market divide the maximum total net social benefit between employers and workers? Is there any net social benefit left unclaimed? e) Suppose that the government imposes a minimum wage of $25 per hour but the government cannot force employers to employ more than the number of workers consistent with their demand curve. i) Is this minimum wage consistent with an efficient allocation of resources? How much is the difference if any between the marginal social benefit and the marginal social cost at the minimum wage? Which one is greater? 1) Calculate the maximum total net social benefit corresponding to the minimum wage g) Compare the total net social benefit before and after the imposition of the nominal wage. Who loses and who gains from the imposition of the minimum wage? Exercise 2 Suppose that the central bank of the US increases the interest rate in the US from 1% to 3% while the European central bank maintains its interest rate at 0.5%. Answer the following questions. Justify your answer using diagrams and the concepts developed in chapter 14 of the lecture notes. No numbers are required. a) What happens to net capital inflows to the US and net capital outflows out of the US? b) What should happen to the exchange rate of the US dollar in terms of the Euro, the European money? Use the demand and supply model to answer this question. c) What happens to US exports, imports and trade balance? d) Is it better to have a fixed exchange rate or a flexible exchange rate? Briefly explain your choice. EXERCISE 3 Read the description of certain events in the markets for selected products; predict the economic impact of these events on the corresponding demand curve, supply curve, equilibrium price and equilibrium quantity. Use the phrases shift left, shift right, shift up, shift down to indicate the effect on the demand and supply curves. It is an incorrect answer to use the expressions, the demand curve or supply curve increases or decreases. In some cases, the event may cause both the demand curve and the supply curve to shift and it is not possible to deduce a definite answer about either the equilibrium idclory Msoroecorem, Agment t ntroductory e cnomcs nt Wter 2021, 2/2021 10 22 AM 3. price or equilibrium quantity. You need not submit diagrams, but you should draw diagrams on a piece of paper to help you answer the questions correctly. Justify your answer using the concepts of chapter 2 of the lectr half the mark notes. Justification is worth Market Event (a) US automobile market US government revokes a tax on imports of cars from Mexico (b) January 2021 Next year's (2021) Wheat Market after the planting expected equilibrium price of wheat is now 20% lower season of 2021 crop has ended (c) Fast food Restaurants Studies show that obesity is not related to fast food served in fast food restaurants. (d) Canadian lumber market The US government imposes a tax on Canadian lumber imported by the US (e) Public The government of transportation the United Kingdom imposed a tax on access by cars to downtown London in London, UK. In the labor market, employers demand hours of work and workers supply hours of work. You are given the following data about the labor market Demand and Supply curves. Table 1 Number of hours of work (1) Number of hours of work Dollars (1) Dollars (2) (3) 35 10 30 25 10 15 20 10 15 15 20 20 25 30 25 20 15 30 35 25 10 30 Answer the following questions. Justify your answer using the concepts of chapter 2 of the lecture notes. a) Plot the demand curve and supply curve of labour in a diagram. (you need not submit the diagram) Which data columns of Table 1 have you used to plot the demand curve and why Which data columns have you used to plot the supply curve and why? Justify your answer using the concepts of chapter 2 of the lecture notes. b) Suppose that the market wage (price of an hour of work) happens to be $15. i) Is this the equilibrium wage? If not, will the wage, the quantity demanded, and the quantity supplied remain unchanged and why? i) If not, how would the wage, the quantity demanded, and the quantity supplied change? Would they increase or decrease? iii) If they change, who will change the wage? iv) If you answer to question b.i) is no, what is the equilibrium wage and quantity demanded and supplied of labor? c) Recall that the surface of a triangle = (Base * Height) /2). Calculate i) the maximum total net social benefit at the equilibrium. i) Calculate the maximum total profit or total benefit of the employers at the equilibrium i) Calculate the producer's surplus (= workers' surplus) at the equilibrium wage at the equilibrium. iv) How much is the difference between the marginal social benefit and the marginal social cost at the equilibrium? d) How does the market divide the maximum total net social benefit between employers and workers? Is there any net social benefit left unclaimed? e) Suppose that the government imposes a minimum wage of $25 per hour but the government cannot force employers to employ more than the number of workers consistent with their demand curve. i) Is this minimum wage consistent with an efficient allocation of resources? How much is the difference if any between the marginal social benefit and the marginal social cost at the minimum wage? Which one is greater? 1) Calculate the maximum total net social benefit corresponding to the minimum wage g) Compare the total net social benefit before and after the imposition of the nominal wage. Who loses and who gains from the imposition of the minimum wage? Exercise 2 Suppose that the central bank of the US increases the interest rate in the US from 1% to 3% while the European central bank maintains its interest rate at 0.5%. Answer the following questions. Justify your answer using diagrams and the concepts developed in chapter 14 of the lecture notes. No numbers are required. a) What happens to net capital inflows to the US and net capital outflows out of the US? b) What should happen to the exchange rate of the US dollar in terms of the Euro, the European money? Use the demand and supply model to answer this question. c) What happens to US exports, imports and trade balance? d) Is it better to have a fixed exchange rate or a flexible exchange rate? Briefly explain your choice. EXERCISE 3 Read the description of certain events in the markets for selected products; predict the economic impact of these events on the corresponding demand curve, supply curve, equilibrium price and equilibrium quantity. Use the phrases shift left, shift right, shift up, shift down to indicate the effect on the demand and supply curves. It is an incorrect answer to use the expressions, the demand curve or supply curve increases or decreases. In some cases, the event may cause both the demand curve and the supply curve to shift and it is not possible to deduce a definite answer about either the equilibrium idclory Msoroecorem, Agment t ntroductory e cnomcs nt Wter 2021, 2/2021 10 22 AM 3. price or equilibrium quantity. You need not submit diagrams, but you should draw diagrams on a piece of paper to help you answer the questions correctly. Justify your answer using the concepts of chapter 2 of the lectr half the mark notes. Justification is worth Market Event (a) US automobile market US government revokes a tax on imports of cars from Mexico (b) January 2021 Next year's (2021) Wheat Market after the planting expected equilibrium price of wheat is now 20% lower season of 2021 crop has ended (c) Fast food Restaurants Studies show that obesity is not related to fast food served in fast food restaurants. (d) Canadian lumber market The US government imposes a tax on Canadian lumber imported by the US (e) Public The government of transportation the United Kingdom imposed a tax on access by cars to downtown London in London, UK. In the labor market, employers demand hours of work and workers supply hours of work. You are given the following data about the labor market Demand and Supply curves. Table 1 Number of hours of work (1) Number of hours of work Dollars (1) Dollars (2) (3) 35 10 30 25 10 15 20 10 15 15 20 20 25 30 25 20 15 30 35 25 10 30 Answer the following questions. Justify your answer using the concepts of chapter 2 of the lecture notes. a) Plot the demand curve and supply curve of labour in a diagram. (you need not submit the diagram) Which data columns of Table 1 have you used to plot the demand curve and why Which data columns have you used to plot the supply curve and why? Justify your answer using the concepts of chapter 2 of the lecture notes. b) Suppose that the market wage (price of an hour of work) happens to be $15. i) Is this the equilibrium wage? If not, will the wage, the quantity demanded, and the quantity supplied remain unchanged and why? i) If not, how would the wage, the quantity demanded, and the quantity supplied change? Would they increase or decrease? iii) If they change, who will change the wage? iv) If you answer to question b.i) is no, what is the equilibrium wage and quantity demanded and supplied of labor? c) Recall that the surface of a triangle = (Base * Height) /2). Calculate i) the maximum total net social benefit at the equilibrium. i) Calculate the maximum total profit or total benefit of the employers at the equilibrium i) Calculate the producer's surplus (= workers' surplus) at the equilibrium wage at the equilibrium. iv) How much is the difference between the marginal social benefit and the marginal social cost at the equilibrium? d) How does the market divide the maximum total net social benefit between employers and workers? Is there any net social benefit left unclaimed? e) Suppose that the government imposes a minimum wage of $25 per hour but the government cannot force employers to employ more than the number of workers consistent with their demand curve. i) Is this minimum wage consistent with an efficient allocation of resources? How much is the difference if any between the marginal social benefit and the marginal social cost at the minimum wage? Which one is greater? 1) Calculate the maximum total net social benefit corresponding to the minimum wage g) Compare the total net social benefit before and after the imposition of the nominal wage. Who loses and who gains from the imposition of the minimum wage? Exercise 2 Suppose that the central bank of the US increases the interest rate in the US from 1% to 3% while the European central bank maintains its interest rate at 0.5%. Answer the following questions. Justify your answer using diagrams and the concepts developed in chapter 14 of the lecture notes. No numbers are required. a) What happens to net capital inflows to the US and net capital outflows out of the US? b) What should happen to the exchange rate of the US dollar in terms of the Euro, the European money? Use the demand and supply model to answer this question. c) What happens to US exports, imports and trade balance? d) Is it better to have a fixed exchange rate or a flexible exchange rate? Briefly explain your choice. EXERCISE 3 Read the description of certain events in the markets for selected products; predict the economic impact of these events on the corresponding demand curve, supply curve, equilibrium price and equilibrium quantity. Use the phrases shift left, shift right, shift up, shift down to indicate the effect on the demand and supply curves. It is an incorrect answer to use the expressions, the demand curve or supply curve increases or decreases. In some cases, the event may cause both the demand curve and the supply curve to shift and it is not possible to deduce a definite answer about either the equilibrium idclory Msoroecorem, Agment t ntroductory e cnomcs nt Wter 2021, 2/2021 10 22 AM 3. price or equilibrium quantity. You need not submit diagrams, but you should draw diagrams on a piece of paper to help you answer the questions correctly. Justify your answer using the concepts of chapter 2 of the lectr half the mark notes. Justification is worth Market Event (a) US automobile market US government revokes a tax on imports of cars from Mexico (b) January 2021 Next year's (2021) Wheat Market after the planting expected equilibrium price of wheat is now 20% lower season of 2021 crop has ended (c) Fast food Restaurants Studies show that obesity is not related to fast food served in fast food restaurants. (d) Canadian lumber market The US government imposes a tax on Canadian lumber imported by the US (e) Public The government of transportation the United Kingdom imposed a tax on access by cars to downtown London in London, UK. In the labor market, employers demand hours of work and workers supply hours of work. You are given the following data about the labor market Demand and Supply curves. Table 1 Number of hours of work (1) Number of hours of work Dollars (1) Dollars (2) (3) 35 10 30 25 10 15 20 10 15 15 20 20 25 30 25 20 15 30 35 25 10 30 Answer the following questions. Justify your answer using the concepts of chapter 2 of the lecture notes. a) Plot the demand curve and supply curve of labour in a diagram. (you need not submit the diagram) Which data columns of Table 1 have you used to plot the demand curve and why Which data columns have you used to plot the supply curve and why? Justify your answer using the concepts of chapter 2 of the lecture notes. b) Suppose that the market wage (price of an hour of work) happens to be $15. i) Is this the equilibrium wage? If not, will the wage, the quantity demanded, and the quantity supplied remain unchanged and why? i) If not, how would the wage, the quantity demanded, and the quantity supplied change? Would they increase or decrease? iii) If they change, who will change the wage? iv) If you answer to question b.i) is no, what is the equilibrium wage and quantity demanded and supplied of labor? c) Recall that the surface of a triangle = (Base * Height) /2). Calculate i) the maximum total net social benefit at the equilibrium. i) Calculate the maximum total profit or total benefit of the employers at the equilibrium i) Calculate the producer's surplus (= workers' surplus) at the equilibrium wage at the equilibrium. iv) How much is the difference between the marginal social benefit and the marginal social cost at the equilibrium? d) How does the market divide the maximum total net social benefit between employers and workers? Is there any net social benefit left unclaimed? e) Suppose that the government imposes a minimum wage of $25 per hour but the government cannot force employers to employ more than the number of workers consistent with their demand curve. i) Is this minimum wage consistent with an efficient allocation of resources? How much is the difference if any between the marginal social benefit and the marginal social cost at the minimum wage? Which one is greater? 1) Calculate the maximum total net social benefit corresponding to the minimum wage g) Compare the total net social benefit before and after the imposition of the nominal wage. Who loses and who gains from the imposition of the minimum wage? Exercise 2 Suppose that the central bank of the US increases the interest rate in the US from 1% to 3% while the European central bank maintains its interest rate at 0.5%. Answer the following questions. Justify your answer using diagrams and the concepts developed in chapter 14 of the lecture notes. No numbers are required. a) What happens to net capital inflows to the US and net capital outflows out of the US? b) What should happen to the exchange rate of the US dollar in terms of the Euro, the European money? Use the demand and supply model to answer this question. c) What happens to US exports, imports and trade balance? d) Is it better to have a fixed exchange rate or a flexible exchange rate? Briefly explain your choice. EXERCISE 3 Read the description of certain events in the markets for selected products; predict the economic impact of these events on the corresponding demand curve, supply curve, equilibrium price and equilibrium quantity. Use the phrases shift left, shift right, shift up, shift down to indicate the effect on the demand and supply curves. It is an incorrect answer to use the expressions, the demand curve or supply curve increases or decreases. In some cases, the event may cause both the demand curve and the supply curve to shift and it is not possible to deduce a definite answer about either the equilibrium idclory Msoroecorem, Agment t ntroductory e cnomcs nt Wter 2021, 2/2021 10 22 AM 3. price or equilibrium quantity. You need not submit diagrams, but you should draw diagrams on a piece of paper to help you answer the questions correctly. Justify your answer using the concepts of chapter 2 of the lectr half the mark notes. Justification is worth Market Event (a) US automobile market US government revokes a tax on imports of cars from Mexico (b) January 2021 Next year's (2021) Wheat Market after the planting expected equilibrium price of wheat is now 20% lower season of 2021 crop has ended (c) Fast food Restaurants Studies show that obesity is not related to fast food served in fast food restaurants. (d) Canadian lumber market The US government imposes a tax on Canadian lumber imported by the US (e) Public The government of transportation the United Kingdom imposed a tax on access by cars to downtown London in London, UK.