Labour Economics

Topics: Supply and demand, Employment, Elasticity Pages: 2 (537 words) Published: October 3, 2014
Assignment Name: Assignment 1

Questions
1. Given below are the demand schedule and supply schedule for the labour market for supervisors. Remember that demand for labour represents the employers’ demand for workers, while supply represents the workers’ willingness to work. Graph the demand and supply curve on one graph and state the equilibrium price and quantity in this market (don’t just draw an arrow pointing at it). Label the graph properly. (3 marks – 2 for a properly labeled and accurate graph, one for clearly identifying equilibrium –both price and quantity – in the labour market) Daily Wage for Supervisors

Quantity Supplied
(000s)
Quantity Demanded
(000s)
$105
5,300
11,000
$110
5,500
10,000
$125
5,800
9,500
$140
6,000
9,000
$150
6,500
8,000
$160
7,000
7,000
$180
8,500
5,500
$200
9,000
5,000

2. Calculate the coefficient of price elasticity of demand if the hourly wage goes from $160 to $180. Is elasticity at this level inelastic or elastic? Use the formula found in Chapter 2 of the textbook. (2 marks)

Coefficient of price elasticity of demand
= % change in the quantity demanded / % change in the price
= 180 – 160 / (180 + 160)/2
= 0.1176%
=5500 – 7000 / (5500 + 7000)/2
= -0.24%
= 0.1176 / -0.24
=-0.4901
Because the coefficient is less than 1, the price elasticity is said to be inelastic.

3. We know that if the price of a product changes, we will see movement along the demand curve. Name and explain, using an example, three factors that can cause the demand curve for labour to shift. (3 marks)

Factors that cause the demand curve for labour to shift can be the income levels of consumers. When there is an increase in one’s pay their confidence will rise which will allow them to want to spend more money. The demand of goods and services increase because there is also an increase in their disposable income. Also when there is an increase income some consumers taste and preferences may change just...
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