Table 4-4

Table 4-4 shows the demand and supply schedules for the labor market in the city of Pixley.
-Refer to Table 4-4.Suppose that the quantity of labor demanded increases by 40,000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

Question

Table 4-4
  
Table 4-4 shows the demand and supply schedules for the labor market in the city of Pixley.
-Refer to Table 4-4.Suppose that the quantity of labor demanded increases by 40,000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

Quizplus · Accepted Answer

To find the new equilibrium, we need to add 40,000 to the quantity demanded at each wage level. This gives us the new demand schedule:

Wage Quantity demanded Quantity supplied 
$5.00 200,000 400,000 
$6.00 240,000 360,000 
$7.00 280,000 320,000 
$8.00 320,000 280,000 
$9.00 360,000 240,000 
$10.00 400,000 200,000 
$11.00 440,000 160,000 
$12.00 480,000 120,000 
$13.00 520,000 80,000 
$14.00 560,000 40,000

Now we can see that the new equilibrium wage is $11.50 (where quantity demanded equals quantity supplied) and the new equilibrium quantity of labor is 610,000. Therefore, the answer is D.

Table 4-4 Table 4-4 Shows the Demand and Supply Schedules for the and Supply