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EC 1 UCI Dr. Bresnock Fall, 2010 Labor Module Assignment (50 points) Student Name: TA Name/Section: 16th (in class lecture) Please limit your answers...

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EC 1 Student Name: UCI TA Name/Section: Dr. Bresnock Fall, 2010 Labor Module Assignment (50 points) Due: Nov. 16 th (in class lecture) Please limit your answers to the spaces provided. If necessary, write on the back of the page. Do not attach printout or additional pages. All questions pertain to the Labor module in the SimEcon . Make sure you have read the “ Labor Manual” which was E-Mailed to you. For many of the assignment's questions, it will be necessary to refer to those instructions. For many of the assignment's questions, it will be necessary to refer to your text. Please use this website to obtain the module: http://class-ms-web.class.csupomona.edu/ and if that site isn’t working, then you can also use http://128.97.186.84/ Open the Labor module. You will see a table entitled, “Initial Labor Market Conditions.” Take notes on or print out this table for future reference. Select “Continue.” You will see a graph entitled, “Initial Equilibrium.” Consider this graph. What commodity is being bought and sold in this market? Bread . What is the equilibrium price of that commodity? $2 . Who is selling this commodity, the workers or the employers? Workers . Does the supply curve represent the workers or the employers? Workers . Who is buying the commodity, the workers or the employers? Employers . Does the demand curve represent the workers or the employers? Employers . In the real world, what does this equilibrium price represent? The equilibrium price is the market price at which the supply of an item equals the quantity demanded; price at which producers are willing to sell a product and at which consumers are willing to buy the product; no surplus or shortage. Select “Discrimination.” You will see a “Labor Market Discrimination” table and the question “How much do Big Pildians discriminate against Little Pildians?” Select “5” and “Continue.” You will see two graphs, one of which is the labor market for Big Pildians and one that shows the labor market for Little Pildians. Did the discrimination have any impact on the labor market for Big Pildians? No. (Yes, No). Why or why not? The demand/supply curves didn’t shift. Employers prefer to hire Big Pildians and avoid Little Pildians. They will choose to hire Little Pildians if they accept lower wages (cheaper) than Big Pildians. This discrimination effectively reduces the demand for members of Little Pildians not Big Pildians. What impact did discrimination have on the demand curve for Little Pildian labor? Decreased . What impact did this change have on the equilibrium wage for Little Pildians? Decreased . What impact did this change have on the equilibrium quantity of Little Pildians? Decreased. What impact did this change have on the unemployment rate of Little Pildians? Unemployment rate increased for Little Pildians since employers are not hiring them. Suppose that the Pildian nation went to war against the Nimrods. Suppose that in this war, a division of Little Pildians became the most decorated division of the Pildian army in the entire nation. Suppose that this division of Little Pildians became national heroes and that this event was highly publicized and caused prejudice against Little Pildians to decrease.
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EC 1 Page 2 Labor Assignment First, examine the labor market for Little Pildians that you generated in the last example. Select “Change Discrimination.” Select “3” and “Continue.” What has happened to the magnitude of the decrease in demand for Little Pildian labor compared to the first example? Decreased . Compared to the first example, what will happen to the equilibrium wage rate for Little Pildians? Increases . Draw the labor market graphs for both Big Pildians and Little Pildians below. Indicate the respective demand curves with and without discrimination and before and after the war. Label all axes as well as the supply and demand curves. If you use abbreviations for your labels, you must define what all those abbreviations mean. Big Pildians Little Pildians Now select “Disturb the Market.” You will see a table that asks which supply or demand variable you want to change. Choose “Cook’s Wage Rate” and “Continue.” Note that the supply and demand curves that you drew above were for the bakery industry. The wage rate of a cook represents an alternative industry, such as the restaurant industry. Change the cook’s wage rate to $9.50 and “Continue.” If the restaurant industry offered a relatively higher wage rate, what would happen to the number of workers looking for work in the bakery industry? Decreases . What would happen to the supply of labor in the bakery industry? Decreases . What would happen to the equilibrium wage rate in the bakery industry? Increases . What would happen to the equilibrium quantity in the bakery industry? Decreases . Illustrate these changes in the labor market by drawing the graph that you see on your computer screen. Label all axes as well as the supply and demand curves and indicate the old and new equilibrium quantities and wage rates. Wage Rate $ (per hr) Wage Rate $ (per hr) Quantity of hours Labor Quantity of hours Labor 0 0 S L S L D L D L D L l D L S L Labor (hrs/wk) Wage Rate (per hr) 0 S L l W E =$18.21 L E l =7760.18 W E l =$20.71 L E =8010.18
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