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Please ask the teacher to help me write down the problem-solving process, coordinate axes and final answer. Thanks! Consider a market with two sectors. The
Please ask the teacher to help me write down the problem-solving process, coordinate axes and final answer. Thanks!
Consider a market with two sectors. The labour demand in SectorA is given by LDA=1 1 5-2.6wA and labour demand in Sector B is given by LDB=94-3.4wB. Suppose overall labour supply is L5=94, where 94 is the number of workers in the market. A. The aggregate labour demand curve has vertical intercept is and slope . The competitive wage would be w=$ if we assume perfect competition in a neoclassical model. B. Suppose a union forms in sector A. Ifthe union sets the wage at $29, there will be workers employed in sector A. Sector B will now emplloy workers and the wage in sector B will be $ Of the workers previously employed in sector A, there are who have spilled over into sector B. In this economy the union density is %. For union workers, the relative wage gap % while the relative wage gain is %. The counterfactual wage is $ C. When the wage is set at $29, suppose the contract curve is vertical. In this case we know that workers will spill over into sector B and the wage in sector B will be wB=$ . Now instead suppose the contract curve is not vertical. If 9 workers decide to wait unemployed in sector A, the wage in sector B will be wB=$Step by Step Solution
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