Question

A suburb of Houston has the following labor supply.demand curves, where W is the hourly wage

rate:

LS = −50 + 20W

LD = 125 − 5W

Question A

Calculate the equilibrium level of employment:   

Calculate the equilibrium wage: $   

What is the size of the labor force in equilibrium:   

What is the unemployment rate in equilibrium:   %

Question B

The regional news finished a story about migration to the area leading to an increase in the labor supply curve. Assume now that the new aggregate labor supply curve is LS = 20W.

Calculate the new equilibrium wage: $   

Question C

Assume the local labor market is slow to react to the new migrants and, as a result, the wage does not adjust to the new equilibrium wage.

What would be the level of employment:   

What is the size of the labor force:   

How many workers are unemployed:  

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