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The demand for labour and supply of labour in a certain industry are given by the equations (10 Marks) ND = 400 - 2w NS = 240 + 2w Where: ND (is the number of workers employers want to hire) NS (is the number of people willing to work, and both demand and supply depend on the real wage w which is measured in dollars per day) Required: 1
The demand for labour and supply of labour in a certain industry are given by the equations (10 Marks) ND = 400 - 2w NS = 240 + 2w Where: ND (is the number of workers employers want to hire) NS (is the number of people willing to work, and both demand and supply depend on the real wage w which is measured in dollars per day) Required: 1. Find employment and real wage in the labour market equilibrium
Expert Solution
ND = 400 - 2w
NS = 240 + 2w
At equilibrium, demand for labor (DL) matches the supply of labor (SL)
Therefore, ND=NS
400 - 2w = 240 + 2w
-2w-2w = 240-400
-4w = -160
W = $40 per day
Substitute $40 to any of the equation to find employment
Using demand equation
ND = 400 - 2w
ND = 400 ? 2(40) = 320 workers.
If we use the supply equation we will get the same answer
NS = 240 + 2w
NS = 240 + 2(40) = 320 workers.
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