Question

The production function in an economy​ is: Y​ = 2​(5.00Nminus0.0025Nsquared​), where the marginal product of labor is given​ by: MPN​ = 2​(5.00minus0.0050N​). The equation for the labor supply curve​ is: NS​ = 55.0 ​+ 10​(1minust​)w​, where NS is the amount of labor​ supplied, w is the real wage and t is the tax rate on wage income. The tax rate is t​ = 0.50. Determine the labor demand function. ​(Enter your responses rounded to two decimal​ places): ND​ = nothingminus nothingw.

Answer 1

The labor demand function would be ND=1000-100w

Step-by-step explanation:

According to the given data we have the following:

Real wage= MPN

MPN=2(5-0.0050N)

Real wage=w

So, using the equation, w=MPN we determine the labor demand function as follows:

w=2(5-0.0050 N)

w=10-0.01 N

0.01 N=10-W

N=10-w/0.01

N=1000-100w

Therefore the labor demand function would be ND=1000-100w