Chapter 9: Labor demand (page 327)
How does a change in technology affect the demand for labor?
it has effects that could increase or decrease the demand for labor.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
About 100 million pounds of jelly beans are consumed in the United States each year, and the price has been about 50 cents per pound. However, jelly bean producers feel that their incomes are too low and have convinced the government that price supports are in order. The government will therefore buy up as many jelly beans as necessary to keep the price at \(1 per pound. However, government economists are worried about the impact of this program because they have no estimates of the elasticities of jelly bean demand or supply.
a. Could this program cost the government more than \)50 million per year? Under what conditions?Could it cost less than \(50 million per year? Under what conditions? Illustrate with a diagram.
b. Could this program cost consumers (in terms of lost consumer surplus) more than \)50 million per year? Under what conditions? Could it cost consumers less than $50 million per year? Under what conditions? Again, use a diagram to illustrate.
Suppose the market for widgets can be described by the following equations:
Demand: P = 10 - Q
Supply: P = Q – 4
where P is the price in dollars per unit and Q is the quantity in thousands of units. Then:
a. What is the equilibrium price and quantity?
b. Suppose the government imposes a tax of \(1 per unit to reduce widget consumption and raise government revenues. What will the new equilibrium quantity be? What price will the buyer pay? Whatamount per unit will the seller receive?
c. Suppose the government has a change of heart about the importance of widgets to the happiness of the American public. The tax is removed and a subsidy of \)1 per unit is granted to widget producers. What will the equilibrium quantity be? What price will the buyer pay? What amount per unit (including the subsidy) will the seller receive? What will be the total cost to the government?
In 2011, Americans smoked 16 billion packs of cigarettes. They paid an average retail price of \(5.00 per pack.
a. Given that the elasticity of supply is 0.5 and the elasticity of demand is -0.4, derive linear demand and supply curves for cigarettes.
b. Cigarettes are subject to a federal tax, which was about \)1.00 per pack in 2011. What does this tax do to the market-clearing price and quantity?
c. How much of the federal tax will consumers pay? What part will producers pay?
What is the difference between demand for labor and supply of labor?
The United States currently imports all of its coffee. The annual demand for coffee by U.S. consumers is given by the demand curveQ= 250 - 10P, whereQis quantity (in millions of pounds) andPis the market price per pound of coffee. World producers can harvest and ship coffee to U.S. distributors at a constant marginal (= average) cost of \(8 per pound. U.S. distributors can in turn distribute coffee for a constant \)2 per pound. The U.S. coffee market is competitive. Congress is considering a tariff on coffee imports of $2 per pound.
a. If there is no tariff, how much do consumers pay for a pound of coffee? What is the quantity demanded?
b. If the tariff is imposed, how much will consumers pay for a pound of coffee? What is the quantity demanded?
c. Calculate the lost consumer surplus.
d. Calculate the tax revenue collected by the government.
e. Does the tariff result in a net gain or a net loss to society as a whole?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
