I know I already have some stuff written, but could you answer both parts? 4. Th
ID: 1137313 • Letter: I
Question
I know I already have some stuff written, but could you answer both parts?
4. The demand for labor is Lo- 40- W, and the supply of labor isLs-4+3W a) What is the market-clearing equilibrium? L- W. 3 b) Suppose the government imposes a S4 tax per unit of labor. What is the new equilibrium? (Hint: draw the supply and demand curves before the tax, then shift the vertical intercept of the demand curve down by $4, keeping the same slope. Find the new equilibrm) wage earned by workers = Wage paid by employers_ Fraction of the tax borne by workers- Fraction of the tax borne by employers - Who appears to be the more elastic side of the market given the relative fractions? (Please circle)Ws 40-53 Workers Employers Neither--they have the same elasticityExplanation / Answer
a.)
LS = Ld
40 – W = 4+3W
36 = 4W
W = 36/4
= 9
L = 40 -9
= 31
b)
New labor demand function:
LD = 40 – (w+4)
= 40 – W – 4
= 36 – W
Equilibrium :
36 –W = 4+3W
32 = 4W
W = 32/4
= 8
L = 36 -8
= 28
Wage earned by worker = $ 8
Paid by employers = $ 8
Fraction of tax borne by workers = $ 1 ( 9-8)
Fraction of tax borne by employers = $ 3
Worker side is more elastic, thus burden of tax is less on workers.