Ps1_101 - Econ 101 Javier Birchenall Due date Tuesday October 6 2009 Problem set 1 The labor market growth and GDP measurement The following

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Econ 101 Javier Birchenall Due date: Tuesday, October 6, 2009 Problem set 1: The labor market, growth, and GDP measurement The following problem set will serve two purposes. First, it will acquaint you with some basic supply and demand analysis for the labor market, and second, it will make you familiar with the basic measure of economic activity, the real Gross Domestic Product, GDP. Plan to spend 6 hours (maybe more) on these questions. Please return the problem set on time (next Tuesday during class), remember you have the chance to miss one and only one, use it wisely. If you have any problems regarding the questions please contact your TA immediately. Good luck! I. A labor market model (35%) Consider a labor market characterized by the a typical supply and demand system of equations. Consider the supply equation f rst. Households decide to o f er their services, their hours of work, according to: l s = αw + ¯ l , in which l s represents the labor supply, w the wage rate, and ¯ l the number of hours people would supply to the labor market even if the wage were zero. The response of the labor supply to wages is positive, α> 0 , because higher wages are an incentive for work. The parameter
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This note was uploaded on 12/25/2009 for the course ECON 101 taught by Professor Dumbass during the Fall '08 term at UCSB.

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Ps1_101 - Econ 101 Javier Birchenall Due date Tuesday October 6 2009 Problem set 1 The labor market growth and GDP measurement The following

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