3. Excess supply with union wage Consider the housing construction industry. Ass

Question

3. Excess supply with union wage Consider the housing construction industry. Assume that the industry is perfectly competitive in both input and output markets. Suppose that, through collective bargaining, a labor union negotiates an industry-wide wage for various kinds of labor (electricians, plumbers, and so on). In particular, it succeeds in negotiating a wage increase for carpenters from $15 to $20 per hour. The following graph shows the labor demand of an individual firm On the following graph, show what happens at the firm level as a result of the union negotiations 30 25 Deman 20 Supply Supply and 12 24 48 60 72 36 QUANTITY OF LABOR Now consider the effects of the wage change on the entire industry

Explanation / Answer

1st Answer

Initial Wage = $ 15 Dollar Per Hour

Final Wage = $ 20 Dollar Per Hour

Incremental Increase in Wage = $ 5 Dollar Per Hour

Initial Qty of Labour = 36 x 1000 = 36,000 Workers

Final Qty of Labour = 24 x 1000 = 24,000 Workers

Excess Supply Of Workers = 36,000 - 24,000 = 12,000 Workers

2nd Answer

Original Demand = 36 x 1000 = 36,000 Workers

Changed Demand = 42 x 1000 = 42,000 Workers

Excess Supply Of Workers = 42,000 - 36,000 = 12,000 Workers

END OF ANSWER

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.