Growth Control and Wages Consider a city with an equilibrium wage of $80 per day, equilibrium employment of 100,000 jobs, and 100 million square feet of housing. The government’s growth-control policy fi xes the maximum total square footage in the city at its current level. New housing can be built, but every square foot of new housing requires that one square foot of old housing be retired from the market. a. Draw a graph with two labor-supply curves, a conventional supply curve and a second that represents labor supply under the city’s growth control policy. b. The supply curve under the growth-control policy is [steeper, fl atter] because. . . . c. Add two labor-demand curves to your graph, an initial demand curve, and a second curve representing a 20 percent increase in labor demand. d. The increase in the demand for labor [increases, decreases, does not affect] the equilibrium wage. The wage change is [larger, smaller] under the growth-control policy because. . . . e. Under the growth-control policy, an increase in the demand for labor [increases, decreases, does not affect] equilibrium employment. The housing consumption per worker [increases, decreases, doesn’t change] because housing prices are higher

QUESTION:

Growth Control and Wages

Consider a city with an equilibrium wage of $80 per day, equilibrium employment of 100,000 jobs, and 100 million square feet of housing. The government’s growth-control policy fixes the maximum total square footage in the city at its current level. New housing can be built, but every square foot of new housing requires that one square foot of old housing be retired from the market.

a. Draw a graph with two labor-supply curves, a conventional supply curve and a second that represents labor supply under the city’s growth control policy.

b. The supply curve under the growth-control policy is [steeper, flatter] because. . . .

c. Add two labor-demand curves to your graph, an initial demand curve, and a second curve representing a 20 percent increase in labor demand.

d. The increase in the demand for labor [increases, decreases, does not affect] the equilibrium wage. The wage change is [larger, smaller] under the growth-control policy because. . . .

e. Under the growth-control policy, an increase in the demand for labor [increases, decreases, does not affect] equilibrium employment. The housing consumption per worker [increases, decreases, doesn’t change] because housing prices are higher.