Question

Assume that the labor demand curve is given by w = 800 - 2n and the labor supply curve is given by w = 200 + 4n, where w is the wage and n is the number of people that work.

a) Calculate the equilibrium wage (w) and employment level (n) in this labor market.

Answer 1

The equilibrium wage in the labor market is 600, and the employment level is 100.

Step-by-step explanation:

To find the equilibrium wage and employment level in this labor market, we need to set the labor supply equal to the labor demand and solve for n, the number of people working.

Equating the two equations: 800 - 2n = 200 + 4n

Combining like terms: 6n = 600

Dividing both sides by 6: n = 100

Substituting n back into either of the original equations, we can solve for w, the equilibrium wage: w = 800 - 2(100) = 600

Therefore, the equilibrium wage (w) is 600 and the employment level (n) is 100.