1. Consider the table below that shows labour demand and supply vary with the real wage in a small economy. (000) Real w

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1 Consider The Table Below That Shows Labour Demand And Supply Vary With The Real Wage In A Small Economy 000 Real W 1 (48.12 KiB) Viewed 26 times

1. Consider the table below that shows labour demand and supply vary with the real wage in a small economy. (000) Real wage ($/hour) 1 2 3 4 5 Labour demand 6 130 120 110 100 90 80 Job acceptances 70 80 90 100 Labour demand and supply 110 Labour force 101 108 115 122 120 Suppose the real wage is fixed at $ 5 per hour a) What is the level of employment? b) Calculate the level of unemployment c) How much of the unemployment is involuntary and how much is voluntary? Suppose now that workers base their decisions on take-home pay, that the real wage is flexible and that workers are paying $ 2 in income tax. 129 136 d) What is the equilibrium wage as paid by firms and the net take-home pay of those employed? e) What are the levels of employment and unemployment? Is there excess demand for labour? f) How much of the unemployment is involuntary and how much is voluntary? Finally, suppose that income tax is removed.