Reference no: EM131166363

Please Solve Question e,f,g,h,and i. Suppose the market for construction workers in the Capital Region is summarized as follows: Supply: w = 100 + 0.04E Demand: w = 600 –0.01E where w is the weekly wage in dollars and E is the number of workers. a. What is the equilibrium wage, w*? What is the employment level, E*? E = 10000 W = 500 b. Calculate and graphically depict producer surplus and worker surplus in this labor market. Producer Surplus= 500,000 Consumer Surplus= 2,000,000 c. What are the elasticity of demand and the elasticity of supply at the equilibrium values? Elasticity of Demand = -5 Elasticity of Supply = 1.25 d. Suppose Shoddy Construction Inc. has 20 laborers. If Shoddy were to pay $1 per week more than w*, how many additional laborers would show up to wanting to work for them? A $1 increase in wage from 500 to 501 would increase the quantity supplied by (10025-10000)=25 Out of this Shoddy already has 20 laborers. Hence additional increase is 25-20=5 Now, consider a payroll tax assessed on firms. e. The government has decided to introduce a pay-roll tax assessed (i.e. levied) on firms. Firms have to pay $50 per week for every worker they employ. What is the new labor demand curve in the market for workers? What are the new equilibrium wage and employment level? Show this situation graphically. f. Compared with the situation before the tax was put in place, how much of the tax is effectively paid by the workers and how much is paid by the firms? Now, consider a payroll tax assessed on workers. g. Now suppose the government decides instead to make the workers pay the tax out of their wages. Each worker gets $50 deducted from his or her pay check each week. What is the new labor supply curve for laborers in the capital region? What is the new equilibrium wage and employment level? Use a graph to explain your result. h. Again, compared with the situation before the tax was put in place, how much of the tax is effectively paid by the workers and how much is paid by the firms? i. Compare your answers to (f) and to (h), what conclusion can you draw about the tax burden?