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Graphically Illustrate (Using the WS and PS Relations)and Explain the Effects

question 43

Essay

Graphically illustrate (using the WS and PS relations)and explain the effects of a reduction in the markup on the equilibrium real wage,the natural rate of unemployment,the natural level of employment,and the natural level of output.


Definitions:

Marginal Benefits

The additional benefit received from consuming or producing one more unit of a good or service.

Production

The process of combining various material inputs and immaterial inputs (plans, knowledge) to make something for consumption (the output).

Marginal Cost

The production cost for one more unit of a product.

Production

The process of creating goods and services through the combination of labor, capital, and natural resources.

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