Question: Consider the market labor demand L_D and labor supply L_S where W is the market wage.

Demand: L_D = 1,000 – 20W

Supply L_S = -200 + 400W

a. What is the equilibrium market wage? What is the equilibrium employment level (L)?

b. Calculate the equilibrium market wage and employment level if workers negotiate a benefit worth $1 that costs the employer $2. (Hint: Consider that the intercept of labor supply changes by the amount of the benefit; the intercept of labor demand changes by the amount of the cost.)

c. Calculate the equilibrium market wage and employment level if workers negotiate a benefit worth $2 that costs the employer $1. (Hint: Same as above hint.)