Question

An increase in the number of available workers shifts the labor supply to the right by 30 hours worked. You will use the information provided above to identify the effect of this increase on the equilibrium wage rate, level of employment, value of Potential GDP, and worker productivity (defined, here, as potential output per hour worked). Identify and quantify the effect of this increase in the number of available workers on: 1) the equilibrium wage rate, 2) the level of employment, 3) the value of Potential GDP, and 4) the value of worker productivity. Round all answers to the nearest one-hundredth.

Answer 1

Answer is explained below.

Step-by-step explanation:

Initially, market (labour) equilibrium was at

Supply = demand = 160 hours

And EQUILIBRIUM wage = 12$

With equilibrium labour QUANTITY ,the potential GDP was400 million.

Worker productivity=400 million/160=2.5 million

New potential GDP with new EQUILIBRIUM labour QUANTITY is 445 million.

New worker productivity=445 million/180=2.4 million

Due to increase in labour supply,

1) EQUILIBRIUM is wage Decreased from 12 to 10

2) level of employment increased from 160 hours to 180 hours

3) level of potential gdp increased from 400 million to 445 million

4) worker productivity decreased from 2.5 million to 2.4 million