Homework Answers
At equilibrium Ls=Ld
20000+350*W=100000-150*W
500*W=80,000
W=160..Equilibrium Wage
L=20000+350*(160)=76000...Employment levels
Ans 2)
Ls has increased by 20000 for any W
New Ls=40000+350W
Ld=100000-150W
At equilibrium
Ls=Ld
40000+350W=100000-150W
500W=60000
W=120..New Equilibrium Wage
L=82000.. New Employment
This increase in employment is not by 20000 because we see movement along demand curve and due to new addition of supply wage rate changes which in turn have negative impact on employment levels . For an example if wage rate decreases by $1 then labor demanded will increase by 150 therefore in our case due to change in wage level from $160 to $120 employment increases by 150*(160-120)=6000 not by 20000
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