Business, 07.04.2020 19:31 schoolemailonlyno1

Consider an economy with two sectors: manufacturing and services. Demand for labor in manufacturing and services are described by the following equations

Lm=200-6Wm

Ls=100-4Ws

Where L is labor, W is the wage and the subscripts denote the sectors. The economy has 100 workers who are willing and able to work in either sector.

a. If workers are free to move between sectors what relationship will there be between Wm and Ws

b. Suppose that the condition in part a holds and wages adjust to equilibrate labor supply and labor demand. Calculate the wage and employment in each sector.

c. Suppose a union establishes itself in manufacturing and pushes manufacturing wage to 25. Calculate employment in manufacturing.

d. In the aftermath of the unionization of manufacturing, all workers who cannot get the highly paid union jobs move to the service sector. Calculate the wage and employment in services

e. Now suppose that workers have a reservation wage of 15 dollars= that is, rather than taking a job at a wage below 15 dollars, they would rather wait for a 25 dollar union job to open up. Calculate the wage and employment in each sector. What is the economy’s unemployment rate?

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Consider an economy with two sectors: manufacturing and services. Demand for labor in manufacturing...