In this question please use only one graph. This way, many students will understand the questions better and also avoid making errors.
(a) Please make a Supply and Demand graph for the Labor Market. Label the vertical axis as "Wage" and the horizontal axis as "Quantity ofLabor Demanded and Supplied". Label the Supply of Labor line as S1 and the Demand for Labor line as D1. Label the equilibrium price as $20 and the equilibrium quantity of labor as 10 million workers.
(b) Please explain which people in the economy represent the Supply of Labor.
(c) Please explain which people in the economy represent the Demand for Labor.
(d) Now decrease the Demand for Labor and label the new Demand as D2.
(e) After the Demand has decreased, estimate the Qd of Labor. _______________
(f) After the Demand has decreased, estimate the Qs of Labor. ________________
(g) In one sentence state what the Qd number in (e) above tells us.
( h) In one sentence state what the Qs number in (f) above tells us.
(i) After the Demand decreased, at the wage of $20, what situation do we have? (And use numbers to support your answer.)
(j) In one sentence state what your answer in (i) above tells us about the macroeconomy.
(k) According to Classical Economics, what would happen now in this market starting from the market situation you stated in (i). Include all the details in your answer about what happens.
(l) After the changes take place that you described in (k) above, estimate the new equilibrium wage and quantity in this Labor Market.
(m) According to Classical Economics, what type of employment situation would this Labor Market have once it achieves the new equilibrium quantity of labor in your answer for (l) above?
( n) A according to Classical Economics, what should government do to help achieve this employment situation you stated in (m) above?
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