In a small rural Pennsylvania town, the aggregate labor supply curve is given by LS = -20 + 5w and the aggregate labor demand by LD = 180 - 5w, where w is the hourly wage rate.

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

Following a national story about a neighboring town, many of this town's residents decided to move, thereby shifting in the labor supply curve. The new aggregate labor supply curve is LS = -40+5w.

Calculate the new equilibrium wage: $

Question C

Assume the local labor market is slow to react to the exit of workers 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: