Question 2 a. Construct the market demand and supply curve for labour, and mark the equilibrium wage and employment.

b. Show and explain the impact of each of the following in your graph in part a.

(i). An increase in price of the good sold by firms

(ii) Decline in price of using capital (substitutable for labour) relative to the wage rate.

c. Assume a union is unhappy with the equilibrium wage rate in the market and decides to restrict labour supply to raise the equilibrium wage. Illustrate this in a demand and supply of labour model.

d. Discuss the consequences of the union's actions (in part c).