5 The labor market model I Suppose the following equations c

5. The labor market model (I): Suppose the following equations characterize sup-ply and demand in lhe labor market model:

2 X 30

labor supply: 12

labor demand: Ld 60 —

Equilibriulll occurs at an employment level L* and a wage w* , so that the labor market clears. That is, supply is equal to demand: LS Ld

(a) What are the endogenous variables in the labor market model?

(b) Solve for the equilibrium values of these endogenous variables

(a) The endogenous variables in the labour market model is the wage w and the employment level of the labour L.

(b) Here there are three equation

labour supply(LS) : 2w+30

labour demend(LD) : 60-w

equilibrium condition LS=LD

By using these three equation

2w+30=60-w

3w=30

w=30

the employment level of labour is find

2*10+30=50 or 60-10=50