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Ackbar
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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
Ackbar Group Title
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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Ackbar Group TitleBest 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

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

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

Ackbar Group TitleBest 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

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

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

Ackbar Group TitleBest 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

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

Ackbar Group TitleBest 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

dpflan Group TitleBest 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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