((((((ALL ONE Question ))))))))))))

Excess supply with union wagesa

Consider the housing construction industry. Assume that the industry is perfectly competitive in both input and output markets. Suppose that, through collective bargaining, a labor union negotiates an industry-wide wage for various kinds of labor (electricians, plumbers, and so on). In particular, it succeeds in negotiating a wage increase for carpenters from $12 to $16 per hour.

The following graph shows the labor demand of an individual firm.

Now consider the effects of the wage change on the entire industry.

Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.

Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.

24 n 20 Demand 16 Supply Supply 12 mand 4 0 0 10 20 30 40 50 60 QUANTITY OF LABOR (Number of workers) Now consider the effects of the wage change on the entire industry. Graph Input Tool 24 I Wage Rate (Dollars per hour) 12 20 Quantity Demanded (Thousands of workers) 30 Quantity Supplied Supply 30 (Thousands of workers) 16 2 Excess Supply (Thousands of workers) Shortage (Thousands of workers) O 12 mand Demand Shifter 4 Pro-union Advertising (Millions of dollars) 0 10 20 30 40 50 60 QUANTITY OF LABOR (Thousands of workers) The union's wage increase from $12 to $16 per hour causes an excess supply of thousand workers Suppose that the union, in order to mitigate the unemployment caused by the wage increase, bolsters demand by rolling out a "Buy Union" advertising campaign. If the union spends $4 million on the campaign, the excess supply of labor will be thousand workers. 24 n 20 Demand 16 Supply Supply 12 mand 4 0 0 10 20 30 40 50 60 QUANTITY OF LABOR (Number of workers) Now consider the effects of the wage change on the entire industry. Graph Input Tool 24 I Wage Rate (Dollars per hour) 12 20 Quantity Demanded (Thousands of workers) 30 Quantity Supplied Supply 30 (Thousands of workers) 16 2 Excess Supply (Thousands of workers) Shortage (Thousands of workers) O 12 mand Demand Shifter 4 Pro-union Advertising (Millions of dollars) 0 10 20 30 40 50 60 QUANTITY OF LABOR (Thousands of workers) The union's wage increase from $12 to $16 per hour causes an excess supply of thousand workers Suppose that the union, in order to mitigate the unemployment caused by the wage increase, bolsters demand by rolling out a "Buy Union" advertising campaign. If the union spends $4 million on the campaign, the excess supply of labor will be thousand workers