Grant from the state to increase its marketing efforts

Reference no: EM13687809

Consider a self contained city, in which all workers live in the city. The initial equilibrium wage is Wo and the initial equilibrium employment level is No.

1. The city receives a grant from the state to increase its marketing efforts to attract tourists. Use a supply-demand graph for the city's labor market to show the effect of this program on the wage (W1) and employment level (N1). Describe what assumptions underlie your graph

2. The state drops its tourism grant program; however the city decides to continue the program, financing it out of local tax revenues. Illustrate what effect this change has on the city's labor market (W2 and N2) relative to (a.) Describe what assumptions you made in arriving at your graphical depiction of the situation

Reference no: EM13687809

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