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Unformatted text preview: Once you have generated aggregate supply and demand curves for labor, finding the market equilibrium, as with the goods and services market, is simply a matter of finding the intersection of the two curves (unless there is an artificial restriction on the market, such as a minimum wage). Let us consider two cases: an unrestricted labor market with shifts in the supply or demand curves, and a restricted market with a minimum wage. Unrestricted Labor Market First, let us consider the market for hot chocolate when the price of marshmallows increases. Assuming that marshmallows and hot chocolate are complementary goods, the rise in the price of marshmallows causes a drop in the demand for hot chocolate. When demand for hot chocolate shifts in (drops), the price of hot chocolate falls. This drop in the price of hot chocolate lowers the MRP of every worker in the hot chocolate...
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This note was uploaded on 12/13/2011 for the course ECO 1320 taught by Professor Staff during the Fall '11 term at Texas State.
- Fall '11
- Supply And Demand