# Tutorial 3_2011 _answer for students_ - ECON1002...

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ECON1002 Introductory Macroeconomics, S1 2011 Tutorial Tasks 1 R EADING G UIDE : R EVIEW C HAPTERS 5 AND 6 OF BOF AS PREPARATION FOR THIS TUTORIAL . Y OU SHOULD ALSO LOOK OVER YOUR LECTURES NOTES FOR W EEKS 1 TO 3. Key Concepts: Labour demand; labour supply; the labour market, unemployment, Business Cycle, Output Gap, Natural rate, Okun’s Law. R EVIEW OF C ONCEPTUAL U NDERSTANDING These are to be attempted before the tutorial. They will not normally be covered in the tutorial, maybe, except for a quick review, time permitting. The answers are typically found in the textbook and lecture notes. 1. How is the unemployment rate measured? 2. What are the distinguishing features of the different types of unemployment recognised by economists? 3. What are the arguments, for and against, the payment of generous unemployment benefits? 4. What is the role of productivity? How does it relate to employment and GDP? 5. How is the participation rate related to (un)employment? 6. What is a recession? 7. What is Okun’s Law? 8. What is the natural rate of unemployment? N OTE : S TUDENTS ARE REQUIRED TO SUBMIT WRITTEN ANSWERS TO P ROBLEMS 4 AND 5 ( MARKED WITH *) IN THEIR DESIGNATED TUTORIAL CLASSES . P ROBLEMS 1. Production data for Bob’s Bicycle Factory are as follows. Number of Workers Bikes assembles/day 1 10 2 18 3 24 4 28 5 30 Other than wages, Bob has costs of \$100 (for parts and so on) for each bike assembled. a. Bikes sell for \$130 each. Find the marginal product and the value of marginal product for each worker (don’t forget about Bob’s cost of parts) b. Make a table showing Bob’s demand curve for labour. T UTORIAL 3 (Week 4: beginning 21 st March)

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ECON1002 Introductory Macroeconomics, S1 2011 Tutorial Tasks 2 c. Repeat part (b) for the case in which bikes sell for \$140 each. d. Repeat part (b) for the case in which worker productivity increases by 50 percent. Bikes sell for \$130 each. a. The table below shows marginal products and the value of marginal products for each worker added. Since bikes sell for \$130, but non-labour costs are \$100 per bike, the value of a worker’s marginal product equals \$30 (\$130 – \$100) times the number of additional bikes assembled. Number of workers Marginal product Value of marginal product 1 10 \$300 2 8 240 3 6 180 4 4 120 5 2 60 b. Bob’s demand for labour at each wage is: Wage Number of workers \$300/day 1 240 2 180 3 120 4 60 5 c. If bikes sell for \$140 each then the value of each worker’s marginal product is \$40 times his or her marginal product. The table in part b becomes: Number of workers Marginal product Value of marginal product 1 10 \$400 2 8 320 3 6 240 4 4 160 5 2 80 In this case Bob’s demand for labour at each wage is: Wage Number of workers \$400/day 1 320 2 240 3
ECON1002 Introductory Macroeconomics, S1 2011 Tutorial Tasks 3 160 4 80 5 d. If labour productivity increases by 50%, marginal products are as given in the table below. The value of the marginal product is found by multiplying the marginal product

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## This note was uploaded on 08/18/2011 for the course ECON 1002 taught by Professor Markmelatos during the Three '10 term at University of Sydney.

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Tutorial 3_2011 _answer for students_ - ECON1002...

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