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Question: Suppose the labour market of a particular economy is described by the labour demand and labour supply equations as follows: Labour Demand Ld = 125 - 5w; Labour Supply Ls = 20 +10w. In these equations L is the number of labour hours and w is the hourly wage (dollars per hour). A) Assume that there is no minimum wage in place and the labour market is in equilibrium. The government decides to grant a payroll subsidy to firms, paying them $3 of subsidy for each labour hour that they employ. Derive the new after-subsidy labour demand curve. It is easier to calculate if we work with the inverse labour demand function which expresses wage as a function of labour demanded. Note that for the labour demand equation given in Q1 the inverse labour demand is given by wd=25-0.2L. The subsidy will shift this curve up by the amount of $3. The new inverse labour demand curve is then wd=25+3-0.2L, or wd=28-0.2L. Now convert this inverse labour demand function back to the standard form Ld = A - B*w. Using this post-subsidy labour demand curve, calculate the equilibrium level of employment after the payroll subsidy is put in place. Round your answer to the nearest integer. B) Using the same scenario as question 1A, What fraction of the payroll subsidy paid to firms is passed onto workers? Round your answer to the nearest hundredth decimal place (e.g. supply answers which look like 0.55, 0.23, etc.).
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Given a 15% raise in a good's price and a 25% decrease in quantity demanded for good by consumer, which of the following types of elasticity best describes the demand curve for the consumer?
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FIU administrators believe that a new approach to interactive learning will improve the experience of FIU students and improve educational attainment. A trial program is implemented for certain courses in the fall semester. The administrators hope th..
Economics is the study of how society chooses to allocate its scarce productive resources (labor, capital, land, entrepreneurial talent).
When the price of eggs increased by 10%, quantity demanded decreased by 10%. As a result, revenues from the sale of eggs did not change
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Assume the following data describe the gasoline market: Price per gallon $2.00 2.25 2.50 2.75 3.00 3.25 3.50 Quantity Demanded 32 30 29 28 22 21 20 Quantity Supplied 16 20 24 28 32 36 40 (a) What is the equilibrium price?
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