Question

The residents of a certain dormitory have collected the following data: People who live in the dorm can be classified as either involved in a relationship or uninvolved. Among involved people, 5 percent experience a breakup of their relationship every month. Among uninvolved people, 10 percent enter into a relationship every month. What is the steady-state percentage of residents who are uninvolved

Answer 1

The steady-state percentage of residents who are uninvolved = 0.33%

Explanation:

This is an example of the natural rate of unemployment given the steady-state percentage of residents who are uninvolved in the question. From the question, the break-up rate represents the rate of job separation in the natural rate of unemployment, while the rate that enters into a relationship represents the rate of job finding in the natural rate of unemployment.

The formula for the natural rate of unemployment = U/L = s / (s + f)

So, the steady-state percentage of residents who are uninvolved = U/L = s / (s + f)

Where U/L = natural rate of unemployment

s = rate of job separations

f = rate of job finding

s = 5 percent

f = 10 percent

The steady-state percentage of residents who are uninvolved

= 5% / (5% + 10%)

= 0.33%