problem set 2
PROBLEM SET 2
Name: ___________________________________
Problem Set 2 is to be completed by 11:59 p.m. (ET) on Monday of Module/Week 4.
1. The following table presents data for wages in the market for internet security professionals.
(HINT: in the labor market the roles are reversed. Those who want to hire labor are the demanders. The workers enter the work force providing labor to the market place so they are the suppliers.)
Wage
Quantity Demanded
Quantity supplied
$50,000
20,000
14,000
$60,000
18,000
18,000
$70,000
16,000
22,000
$80,000
14,000
26,000
$90,000
12,000
30,000
What is the equilibrium wage? $60,000
Now, consider this scenario - Due to an increase in the internet security threats, the government wants to apply a price control in this market to encourage more people to become internet security professionals. Assume that a wage control is set at $75,000. Will this increase the number of people entering this labor market? Why or why not? Will this increase the number of people hired? Why or why not?
This will encourage more workers because wage rate has increased. But demand for labour has decreased because the employers are now not willing to pay. Therefore, ultimately, the number of people entering this labor market will not increase.
2. Assume you are a policymaker in Washington DC. Lobbyists for the preschoolers of America have put pressure on their representatives to cap prices on graham crackers. You have been assigned a position on a new committee to study the impact of a price ceiling on graham crackers.
a) This price ceiling will have two effects. First it will result in a shortage in the market since quantity demanded will now exceed quantity supplied. The second effect will be the emergence of a black market, where the good will be traded illegally.
Consider the following diagram:
Initially, when there was no restriction, the equilibrium occurred at point E, where the equilibrium price is OP* and the equilibrium quantity
Name: ___________________________________
Problem Set 2 is to be completed by 11:59 p.m. (ET) on Monday of Module/Week 4.
1. The following table presents data for wages in the market for internet security professionals.
(HINT: in the labor market the roles are reversed. Those who want to hire labor are the demanders. The workers enter the work force providing labor to the market place so they are the suppliers.)
Wage
Quantity Demanded
Quantity supplied
$50,000
20,000
14,000
$60,000
18,000
18,000
$70,000
16,000
22,000
$80,000
14,000
26,000
$90,000
12,000
30,000
What is the equilibrium wage? $60,000
Now, consider this scenario - Due to an increase in the internet security threats, the government wants to apply a price control in this market to encourage more people to become internet security professionals. Assume that a wage control is set at $75,000. Will this increase the number of people entering this labor market? Why or why not? Will this increase the number of people hired? Why or why not?
This will encourage more workers because wage rate has increased. But demand for labour has decreased because the employers are now not willing to pay. Therefore, ultimately, the number of people entering this labor market will not increase.
2. Assume you are a policymaker in Washington DC. Lobbyists for the preschoolers of America have put pressure on their representatives to cap prices on graham crackers. You have been assigned a position on a new committee to study the impact of a price ceiling on graham crackers.
a) This price ceiling will have two effects. First it will result in a shortage in the market since quantity demanded will now exceed quantity supplied. The second effect will be the emergence of a black market, where the good will be traded illegally.
Consider the following diagram:
Initially, when there was no restriction, the equilibrium occurred at point E, where the equilibrium price is OP* and the equilibrium quantity