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Q4(Ch7, Labor Market): Suppose in SMU nation. The production function is: Y : AK0'5L0'5, o Derive a expression for labor demand as a function of
Q4(Ch7, Labor Market): Suppose in SMU nation. The production function is: Y : AK0'5L0'5, o Derive a expression for labor demand as a function of wage rate Ld : F(w). 0 Assume A = 1, K = 100, but SMU government do not know how many labors in market. Nonetheless, government observes that market wage 10* : 2. Given these information, 1. How much is labor supply L3 in SMU? (remember, L3 = Ld at equilibrium) 2. How much is rental rate R? 0 Suppose there is an immigration inow increase labor supply to 9. What is new equilibrium wage mi\"? 0 Suppose government plan to impose a mandatory minimum wage law such that mm\" = w*. What will happen to labor demand Ld, will it cause unemployment? if so, by how much? c There is an economist in government proposed an alternative solution. Instead of minimum wage law, we can increase our capital stock to maintain previous wage 10*. Is that a reasonable solution? if so, by how much increasing in K can achieve that goal
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