Assume that aggregate demand curve can be expressed by the following function: W = 55 – 3Q, while the aggregate supply curve can be expressed by the following function: W = 5+7Q. Here W denotes wage level in thousand dollar and Q denotes unit of labors in million people.
a. What is labor equilibrium wage level and units of labor?
b. Draw the demand curve and supply curve in one diagram.
c. Explain three factors to result in shift of demand curve and three factors to result in shift of supply curve in detail.
d. Suppose engineering industry experienced large demand of product and thus hiring lots of people in labor market; however, there are no sufficient amount of labor force in the market. Please explain how will market respond to this labor shortage in short run and long run by applying Cobweb Model. (The combination of words and diagram will be preferable.)