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EC111Class8Questions

EC111Class8Questions - above before the wage increase...

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UNIVERSITY OF ESSEX Autumn Term 2011/12 DEPARTMENT OF ECONOMICS T. Hatton EC111 Introduction to Economics: Class Exercises 8 (week 10) 1) Labour supply. a) Justine faces a wage rate of £8 per hour, she can freely choose her weekly hours of work and she chooses to work 36 hours. Her wage rate rises to £10 per hour and she increases her working hours to 38 per week. Draw these situations on a diagram. b) With the wage at £10, the government imposes a lump sum tax of £76 per week. Justine decides to work 40 hours and she says that in this new situation she is just as well of as in (a)
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Unformatted text preview: above before the wage increase. Calculate the income and substitution effects of the original wage increase. c) Draw on a diagram Justine’s labour supply curve and calculate her labour supply elasticity. 2) “When a union is formed and raises the wage rate in an industry, workers will be attracted to that industry, so wages in non-unionised industries must rise” Examine this statement when: a) There is no monopsony in the labour market. b) There is monopsony in the labour market....
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