The supply and demand for labor are given by W=100+5L and W=2000-10L, respectively. W represents the wage and L represents units of labor.
1. what is the equilbrium W and L.
2. Suppose that employers provide health insurance benefits to workers at a cost of $300 per unit of labor . Assuming that workers value the insurance at $500 per unit of labor, what is the new equilbrium W and L?
3. What did the introduction of health insurance do to the distribution of labor compensation across workers and employers relative to the equilibrium in part a?
Workers gain an additional 66.67 per unit of labor. Employers gain 133.33 per unit of labor.
4. Are there are gains or losses in economic surplus relative to the equilibrium in part a? If so, calculate them.
total worker surplus gained
total employers surplus gained