Question IV In the country of Pristine, the labour demand and supply are given by L^d = 400 25W and L^s = 360 + 120W correspondingly. Using this information, answer the following questions:

(a) (10 points) Solve for the equilibrium in the labour market. Draw the supply and demand on a graph with wages on the vertical axis and labour supply and demand on the horizontal axis. Label all points including equilibrium values and intercept terms.

(b) (10 points) Suppose that the government imposes a 10% wage income tax. Solve for the new equilibrium. On a similar graph to part (a), draw the old and new equilibria. Calculate the total amount of taxes paid to the government.