Problem Set #1 -

1. Intro:Who are the threeactorsin labor economics? What are their goals?

2. Causal Inference:Labor economists often are interested in understanding labor supply and demand elasticity as these have implications for public policy, like minimum wage and welfare programs. In equilibrium, wages and employment are determined by both demand and supply. See the following figure for a complication in estimating elasticity.

So Dollars S Z ..... R Wo Z W2 DI W1 Do E2 Employment Eo