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

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

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

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

Ackbar
 2 years ago
Best 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 \[LD = LS\] \[ 34  4w = 10 + 2w\]

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

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

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

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

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

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