Business

Unit 6 Assignment

Student Name:

Please answer the following questions. Submit as a Microsoft Word® document to the Dropbox when completed.

1. How can we measure the opportunity cost of leisure? Why is the supply curve for labor usually upward sloping?

We can measure the opportunity cost of leisure by how important it is for you to make money wealthier people don’t really care how or what they do on their leisure time so they read and watch tv or do whatever they want. Whereas the lower income people spend more time looking for other opportunities to make money so that way they can afford to do more things at a time in which they can take off to enjoy.

The supply curve for labor is upward because there is an increase in human capital which is the accumulated training and skills that workers possess. There are also changes in technology, changes in the price of a product, changes in the quantity of other inputs, and also changes in the number of firms in the market. The Market supply curve is determined by adding up the quantity of labor supplied by each of the workers at different wages paid. Keeping all other variables constant will also affect the workers willingness to supply labor. The curve factors affects the increase in the population, change in demographics and changing alternatives.

2. In the graph below, assume that the market demand curve for labor is initially D1. Answer the following questions.

[pic]

a. What are the equilibrium wage rate and employment level?

b. What area represents economic rent?

c. Assume that the price of a substitute resource decreases, other things constant. What happens to demand for labor?

What are the new equilibrium wage rate and employment level?

What happens to economic rent?

d. Suppose instead that demand for the final product increases, other things constant. Using labor demand curve D1 as your starting point, what...