Equilibrium in the labor market, Macroeconomics

Assignment Help:

Q. Equilibrium in the labor market?

Equilibrium in the labor market 

Real wage W/P will be equal to the equilibrium real wage in the classical model

Without trade unions andgovernment intervention, labor market would always be in equilibrium in the classical model. This means that real wage will be equal to equilibrium real wage - the level of real wage that will equilibrate labor demand and labor supply. 

1039_Equilibrium in the labor market.png

Figure: Equilibrium in the labor market

It's also clear from the graph that total amount of labor L is concluded in labor market. When real wage is equal to equilibrium real wage, supply of labor is equal to demand for labor and this is the amount which would be used in the production. We then have full employment.

If real wages are higher than equilibrium real wage, demand for labor would be less than supply. Difference is the amount of unemployment beyond natural rate of unemployment. In equilibrium, there is hence no 'involuntary' unemployment in classical model.


Related Discussions:- Equilibrium in the labor market

What is the law of comparative advantage, What is The law of comparative ad...

What is The law of comparative advantage The law of comparative advantage, though, suggests that it would be unwise of UK economy to try to replicate German model. First German

Fall in prices and increase in quantity explain, /* Style Definitions */ ...

/* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-prior

Wto negotiations, WTO Negotiations: As is obvious from the above expla...

WTO Negotiations: As is obvious from the above explanation  that India has favoured multilateral trade reforms ever since the time of GATT (1947) to WTO (1995). Currently WTO

Impact will high and variable rates of inflation, What impact will high and...

What impact will high and variable rates of inflation have on the economy? How will they influence the risk accompanying long-term contracts and related business decisions?

#GDP, #“Nominal GDP declined between 2008 and 2009, therefore the GDP defla...

#“Nominal GDP declined between 2008 and 2009, therefore the GDP deflator must also have declined.”

Monetary sector of the economy, how do i calculate how much the gorverment ...

how do i calculate how much the gorverment should spend if the MPC is 0.8 and 200million is requered to reach full employment ?

Discuss about asymmetric information, A) With asymmetric information, free ...

A) With asymmetric information, free markets may not lead to efficient outcomes because the market for a service or product may break down due to adverse selection. Explain what ad

Formulate null and alternative hypotheses to test analysts, Many investors ...

Many investors and financial analysts believe the Dow Jones Industrial Average (DJIA) provides a good barometer of the overall stock market. On January 31, 2006, 9 of the 30 stocks

Explain the gaap-determine the impairment loss, Panzer is a U.S. company.  ...

Panzer is a U.S. company.  It originated in the 1970s as a family-owned business that manufactures fine watches. The family continued to build the company by reinvesting profits in

Price and quantity of lumber, The price and quantity of lumber and other bu...

The price and quantity of lumber and other building materials has gone up recently. Show graphically and explain what might have caused this.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd