Use the figure below to answer the following questions Real

Use the figure below to answer the following questions Real wage rate (2002 dollars per hour) LS 25 20 15 10 0 50 100 150 200 250 300 Labour (billions of hours per year) Figure 22.3.2 2) Refer to Figune 2W s the equilibrium real wage rate? (1 Mark) 3) Refer to Figure 22.3.2. The equilibrium quantity of labour is? (1 Mark) 4) Refer to Figure 22.3,2. What will be the effect if the real wage increases to $20 an hour? Explain. (2 Marks)

Solution

Req 2: Equilibrium real wage rate: 15 per hour (where Demand and supply curve of labor intersects each other) Req 3: Equilibrium quantity= 150 billions of hours (where Demand and supply curve of labor intersects each other) Req 4. When the wage rate rise to 420. Demand falls to 100 hours and supply increases to 200 units Therefore, there might exist surplus of 100 hours