Suppose the supply curve of electricians is given by w= 10 + 5N, while the demand curve is given by w = 50 -3N.
1. Calculate the equilibrium wage and employment level.
2. Suppose now that the demand for electricians increases to 70- 3N. Assume the market is subject to cobwebs. Calculate thewage and employment level in the first 4 rounds as the wage andemployment levels adjust to the demand shock.
3. What are the new equilibrium wage and employment levels oncethe cobweb model adjusts fully to the demand shock?
4. Is this model a true cobweb model? Explain.