Explain What Will Happen to the Equilibrium Real Wage and Quantity

question 36

Essay

Explain what will happen to the equilibrium real wage and quantity of labour for each of the following scenarios,and use a graph of the aggregate labour market to show the changes.
a. The government decreases income tax rates.
b. The skill level of workers increases.
c. A hurricane destroys a large portion of the capital stock.
d. Workers increase their preference of labour over leisure.
e. A technological change occurs that increases the productivity of all workers,and at the same time the government increases income tax rates.
f. The overall skill level of workers decreases,and at the same time household wealth increases.

---

Definitions:

Variable Costs

Costs that change in proportion to the level of activities or volume of production in a business.

Fixed Costs

Expenses that do not fluctuate with changes in production level or sales volume.

Sales

Transactions between a seller and a buyer where the seller provides goods, services, or assets in exchange for money or other compensation.

Break-even Point

The point at which total cost and total revenue are equal, meaning no net loss or gain, and one has "broken even".