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Q. Assume labor supply is given by w=10+2Ls, where w denotes the wage. Labor demand is given by w= 100-Ld.

(a) Compute equilibrium labor quantity and the corresponding wage

(b) Now assume the city imposes an environmental tax of $10 per unit of labor firms. Which results companies will now lower their willingness to pay for labor by $10 every employee. The city uses the money to beautify the local parks that magnetize many employees to city. Economic consultant firm finds out the labor supply curve will shift because workers will be happy with a wage which is $16 lower than before the improvement. Compute the new equilibrium wage and the new number of jobs. Compared to (a), will the number of jobs increase or decrease?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9724671

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