Question

Assume that the labor demand equation for a fictional country is: Ld = 30 – 2w, where w is the wage per hour worked and Ld is the number of workers demanded by firms. Assume also that the labor supply equation for that country is: Ls = 0.5(w), where Ls is the number of people willing to work. Instructions: Round your answers to the nearest whole number. a. The equilibrium wage is $ and the equilibrium quantity of labor employed is workers. b. At the equilibrium wage, people are unemployed. c. If the supply of workers increased, the number of unemployed would: increase. decrease. stay the same as long as the wage is free to quickly adjust.

Answer 1

Answer: a: wage is $12 and quantity of labour is 6

Explanation:

the question is unclear with regards to whether it is a multiple choice or we have to discuss all three point (from A to C). I will assume the question its a multiple choice

labour demanded  Ld = 30 - 2W  and labour supplied Ls = 0.5W  

Equilibrium Point is where demand and supply meet at that point demand is equal to supply,  therefore to find equilibrium wage we need to equate labour supply curve and labour demand curve

0.5W = 30 - 2W

0.5W + 2W = 30

2.5W = 30

W = 30/2.50  = 12

substitute W = 12 in the labour supply and labour demand equations

ld = 30 - 2(12)  ls = 0.5(12)

ld = 6           ls = 6

when the wage price is $12 the quantity of labour supplied and demanded is 6 . Labour Market is at Equilibrium when wage is $ 12 dollar and quantity of labour supplied and demanded equals to 6.