Unions can raise wages paid to their members in two ways. (i) Unions can negotiate a wage rate that lies above the market clearing wage. While management cannot pay below that rate, management does have the right to decide how many workers to hire. (ii) Construction unions often have agreements that require management to hire only union members, but they also have the power to control entry into the union. Hence, they can raise wages by restricting labor supply.

a. Graphically depict method (i) above using a labor supply and a labor demand curve. Show the market-clearing wage as W_e, the market-clearing employment level as L_e, the (higher) negotiated wage as W_u, the level of employment associated with Wu as L_u, and the number of workers wanting to work at W_u as L_s.

b. Graphically depict method (ii) above using a labor supply and a labor demand curve. Show the market-clearing wage as W_e, the market-clearing employment level as Le, the number of members the union decides to have as Lu (which is less than L_e), and the wage associated with L_u
as W_u.