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Urban Economics | 8th Edition | ISBN: 9780073511474 | Authors: Arthur O'Sullivan
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Predict Wages and Employment In the city of Growville, the equilibrium employment is 100,000 workers, and the equilibrium wage is $100 per day. The elasticity of demand for labor is 1.0 (in absolute value) and the elasticity of supply of labor is 5.0. The employment multiplier is 2.0. Suppose the demand for labor used in the production of exports increases by 6,000 jobs. a. Use a supply-demand graph of the urban labor market to show the effects of the increase in the demand for labor. b. The equilibrium wage [increases, decreases] by percent (to ) computed as. . . . c. The equilibrium employ

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QUESTION:

Predict Wages and Employment

In the city of Growville, the equilibrium employment is 100,000 workers, and the equilibrium wage is $100 per day. The elasticity of demand for labor is 1.0 (in absolute value) and the elasticity of supply of labor is 5.0. The employment multiplier is 2.0. Suppose the demand for labor used in the production of exports increases by 6,000 jobs.

a. Use a supply-demand graph of the urban labor market to show the effects of the increase in the demand for labor.

b. The equilibrium wage [increases, decreases] by percent (to ) computed as. . . .

c. The equilibrium employment [increases, decreases] by percent (to ) computed as. . .

Questions & Answers

QUESTION:

Predict Wages and Employment

In the city of Growville, the equilibrium employment is 100,000 workers, and the equilibrium wage is $100 per day. The elasticity of demand for labor is 1.0 (in absolute value) and the elasticity of supply of labor is 5.0. The employment multiplier is 2.0. Suppose the demand for labor used in the production of exports increases by 6,000 jobs.

a. Use a supply-demand graph of the urban labor market to show the effects of the increase in the demand for labor.

b. The equilibrium wage [increases, decreases] by percent (to ) computed as. . . .

c. The equilibrium employment [increases, decreases] by percent (to ) computed as. . .

ANSWER:

Step 1 of 4

Given, in the city of Growville, the equilibrium employment is 100,000 workers, and the equilibrium wage is $100 per day.

The elasticity of demand for labor is 1, the elasticity of supply of labor is 5, and the employment multiplier is 2.

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