Suppose the supply curve of engineers is given by w=20+4E, while the demand curve is given by w=80-2E. (Where W is wage and E is employment level)
i) Calculate the equilibrium wage and employment level.
ii) Suppose now that the demand for engineers increases to in period zero. Assume the market is subject to cobwebs. In particular, it takes one period for the supply of engineers to adjust to the market wage. Calculate the wage and employment level in each of the following four periods as the wage and employment levels adjust to the demand shock.
iii) What are the new equilibrium wage and employment level?