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Need help with labor market question: deriving labor demand and wage from labor demand function and labor supply function (!?) @dpflan
 2 years ago
 2 years ago
Need help with labor market question: deriving labor demand and wage from labor demand function and labor supply function (!?) @dpflan
 2 years ago
 2 years ago

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AckbarBest ResponseYou've already chosen the best response.0
The labor demand functions is: LD = 34  4w, and the labor supply function is: LS = L* + 2w
 2 years ago

AckbarBest ResponseYou've already chosen the best response.0
if L* = 10, then what is the equilibrium wage and labor demand?
 2 years ago

dpflanBest ResponseYou've already chosen the best response.1
Hey @Ackbar, sure, I'll this a try ;)
 2 years ago

AckbarBest ResponseYou've already chosen the best response.0
\[LD = 34  4w\] and \[LS = L* + 2w\] and L* = 10 so \[LS = 10 + 2w\] Now, equate demand and supply so \[LD = LS\] \[ 34  4w = 10 + 2w\]
 2 years ago

dpflanBest ResponseYou've already chosen the best response.1
OK, so \[w = (34  10) / 6 = 4\]
 2 years ago

AckbarBest ResponseYou've already chosen the best response.0
kk, and LS = 10 + 2*4 = 18
 2 years ago

AckbarBest ResponseYou've already chosen the best response.0
so what would be elasticity of demand here given the wage? just take the derivative of LD with respect to wage?
 2 years ago

dpflanBest ResponseYou've already chosen the best response.1
\[d{LD} / d{w} * (w^{*} / L^{*}) \]
 2 years ago

AckbarBest ResponseYou've already chosen the best response.0
LD = 34  4w, so d(LD) = 4, then 4 * (4 / 18) = 16/18 = 8/9
 2 years ago

dpflanBest ResponseYou've already chosen the best response.1
so that would be inelastic demand for labor at w*
 2 years ago
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