Separated into 7 questions to make it worth your time 7 Give

Separated into 7 questions to make it worth your time:

7) Given what you understand about labor markets generally, the effect the formation of a union sector might have on a non-union sector, the sensitivity the state legislature, Governor’s Office of Economic Development, and Department of Workforce Services has with respect to unemployment, what would you recommend to this labor union and its organizers? Feel free to think this through and elaborate on this, but don’t let your response exceed 1,000 words. If you\'d like to include economic models in your response it will be worth some meaningful extra credit for this module.

Solution

1) Given,  LDSD = 600 – 15W, LSSD= -100 + 10W

equilibrium wage and labour will follow in this market when:

LDSD = LSSD

600-15W = -100+10W

25W = 700 => W = 28

LDSD = 600-15(28) = 180 ; LSSD = -100+10(28) = 180

if Union is possible to get software developers a raise of 10% then this would raise wage to [ 28 +28 of 10%] 30.8. In which case

LDSD = 600-15(30.8) = 138

that is labour demand would fall by 180-138 = 42 units of labour who will get displaced.

2) as found out in the above question the union will have to promise an hourly wage of 30.8 from 28.

3)  LDRC = 120 – 12W, LSRC = -50 + 8W

at eqm: LDRC = LSRC

120-12W = -50+8W

20W = 170 => W = 8.5

LDRC = 120-12(8.5) = 18 ; LSRC = -50 +8(8.5) = 18

if the union delivers as promised, a 10% raise in the current wage would be 8.5+ 8.5 of 10% = 9.35

LDRC = 120-12(9.35) = 7.8 that is reduction in demand of 18-7.8 = 10.2 which is the number of retail clerks who shall be displaced.

4) As found out in the part 3, the wage would have to rise to 9.35.