(Answered) Practical exercise 1assume the demand for teachers ld in a

Economics

Practical Exercise 1:

Assume the demand for teachers (Ld) in a school is given by the following equation: W = 1700 - 2L_D and the supply of teachers (L_S) depends on whether the school is a public school or private school:

Public School Supply: W = 4L_S + 800

Private School Supply: W = 4L_S + 500

What is the equilibrium weekly wage and quantity of teachers in each school?
What is the pay difference between the two schools?
If this was a perfectly competitive market, what should happen to the quantity and wage of private school teachers?
If this was a perfectly competitive market, what should happen to the quantity and wage of public school teachers?

The book answers are as follows:

BOOK ANSWER:

Public: W* = 1400; L* = 150 and Private: W* = 1300; L* = 200
$100
Quantity decreases and wages increase
Quantity increases and wages decrease

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