Suppose there are 108 workers in the economy, with overall labour supply LS=108. The labour demand in Sector A is given by LDA=127-2.6WA and labour demand in Sector B is given by LOB=108-3.7WB. When graphed with the conventional axes, the slope of the aggregate labour demand curve is and its vertical intercept is Assuming the neoclassical model of perfect competition holds, the competitive wage would be w=$ Suppose sector A unionizes and sets the wage at $29. Sector A will employ workers. The number of workers previously employed in sector A who will spill over into sector B is equal to . There will now be workers employed in sector B. The wage in sector B will be equal to $ . In this economy the union density is %. The relative wage gap for union workers is % while the relative wage gain is 9%. The counterfactual wage is $ If the contract curve is vertical when the wage is set at $29, workers will spill over into sector B and the wage in sector B will be Wg=$ If the contract curve is not vertical, but 6 workers decide to wait in unemployment in sector A, the wage in sector B will be WB=$ ort