For parts (c)-(e), consider a market in which some employers engage in wage disc
ID: 1217912 • Letter: F
Question
For parts (c)-(e), consider a market in which some employers engage in wage discrimination against women and some do not. Suppose that non-discriminatory employers are willing to hire up to 10 women at the same wage men. Discriminatory employers have a demand curve given by WAWsr 3- (1/5)*LH if the number of female workers hired is greater than 10, where WRWA is the female/male wage ratio and Liris number of women employed. Female labor supply is Liv- (54/5) 2 (WRWA). c) (8) Draw a graph ofiabor supply and demand with the female/male WPWM wage ratio on the vertical axis and the number of women employed Liv on the horizontal axis. Label all axes and curves 0.6 la Los 12-Explanation / Answer
Labor demand curve is drawn using the fact that WF/WM is 1 till LW attains a value of 10 and beyond that point, WF/WM becomes a usual downward sloping labor demand curve WF/WM = 3 – LW/5. So the y intercept is 1 (Put LW =0) and x intercept is 15(Put WF/WM =0)
Labor supply is usual positively sloped with x intercept being 10.8.
The interaction of labor supply and demand will determine the equilibrium values of WF/WM* and LW*
WF/WM = 3 – LW/5 or LW = 15 – 5WF/WM
LW = 10.8 + 2WF/WM
At equilibrium, Ld = Ls
15 – 5WF/WM = 10.8 + 2WF/WM
4.2 = 7WF/WM
WF/WM* = 0.6
Hence the equilibrium wage ratio is 0.6. The wage discriminating employers give only 60% of male wages to female workers when they hire more than 10 female workers
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