For each of the following scenarios, state whether the unemployment is frictional, structural or cyclical. Justify your answer.

(a) Ted lost his job when the steel mill closed down. He lacks the skills to work in another industry and so has been unemployed over a year.

(b) Gwen had a job as a clerk but quit when her husband was transferred to another state. She looked for a month before finding a new job that she liked.

Question 3

(a) Why does the labour demand curve slope downwards?

(b) A garment factory's production function is provided in the table.The gross profit per unit (difference between selling price and material cost, but not including the cost of labour) is $100.

# Workers Output

1 20

2 36

3 48

4 56

5 60

6 62

(i) If the wage rate is $1,000 a week, how many workers should the factory hire?

(ii) If a surge in popularity for the factory's brand allows them to raise the product price such that the gross profit rises to $150, how many workers will the factory hire now?

(iii) Calculate the number of garments produced in each of the two cases above.