Consider the following model of the labor market:
Labor supply:
Labor demand:
)
The value of the equilibrium quantity of labor,L,and wage,w,are:
A) ; .
B)L* = 5;w* = 6.
C)L* = 6;w* = 5.
D)L* = 6;w* = 6.
E)Not enough information is given.

Question

Consider the following model of the labor market:
Labor supply: 
Labor demand: 
)
The value of the equilibrium quantity of labor,L,and wage,w,are:
A) ; . 
B)L* = 5;w* = 6. 
C)L* = 6;w* = 5. 
D)L* = 6;w* = 6. 
E)Not enough information is given.

Quizplus · Accepted Answer

In equilibrium, the quantity of labor supplied equals the quantity of labor demanded. From the labor supply equation, we have: 
Ls = 10 - 2w 
And from the labor demand equation, we have: 
Ld = 4 + 2w 
To find the equilibrium quantity of labor, we set Ls = Ld: 
10 - 2w = 4 + 2w 
Solving for w, we get: 
w = 3 
Substituting w = 3 back into either the labor supply or demand equation, we can find the equilibrium quantity of labor: 
L* = 10 - 2w = 4 
Therefore, the equilibrium quantity of labor is 6 (Option C), and the equilibrium wage rate is $5 (Option C).

Consider the Following Model of the Labor Market