3. Consider an economy with two sectors: manufacturing and services. Assume that in this economy, there are 300 workers

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3 Consider An Economy With Two Sectors Manufacturing And Services Assume That In This Economy There Are 300 Workers 1 (270.57 KiB) Viewed 28 times

3. Consider an economy with two sectors: manufacturing and services. Assume that in this economy, there are 300 workers who are freely able and willing to move and work in each sector. The demand for labor in each sector is described by the equations below. 5Wm Lm = 400 Ls = 200 – 7W a. Assume that wages are free to adjust to ensure equilibrium in both sectors. Find the wage and employment in each sector. b. Suppose a union establishes itself in the manufacturing sector and pushes the manufacturing wage to $40. What is the new level of employment in manufacturing? C. In the aftermath of unionization, any employee who is unable to find work in manufacturing will move to the service sector. Calculate the wage and employment in the service sector. d. Assume that in the aftermath of unionization, workers develop a reservation wage of $18 – they are unwilling to work for any wage below $18. Calculate the wage and employment in each sector. What is the economy's unemployment rate?