In a small rural Pennsylvania town, the aggregate labor supply curve is given by LS = -20 + 5w and the aggregate labor demand by LD = 180 - 5w, where w is the hourly wage rate.
Question A
Calculate the equilibrium level of employment:
Calculate the equilibrium wage: $
What is the size of the labor force in equilibrium:
What is the unemployment rate in equilibrium: %
Question B
Following a national story about a neighboring town, many of this town's residents decided to move, thereby shifting in the labor supply curve. The new aggregate labor supply curve is LS = -40+5w.
Calculate the new equilibrium wage: $
Question C
Assume the local labor market is slow to react to the exit of workers and, as a result, the wage does
not adjust to the new equilibrium wage.
What would be the level of employment:
What is the size of the labor force:
How many workers are unemployed: