Re: Dse 2010 doubt .Help.

Posted by Granpa Simpson on Jun 14, 2014; 7:23pm
URL: http://discussion-forum.276.s1.nabble.com/Dse-2010-doubt-Help-tp7592720p7592742.html

For question number 43 answer will be a..this you can get by comparing the real wage that will lead to zero labor supply..the labor supply equation is given by Ls=-γ+δ*(W/P), from this you can get the wage rate at which labor supply=0 which comes out to be (W/P)=γ/δ.
Now since at this wage rate Ls=0 so wage rate cannot decline, it has to increase, in order to increase labor demand the MP(L)>real wage rate at zero labor supply which means β>γ/δ, this is the only condition which will lead to higher demand for labor leading to higher wage rates which will increase the labor supply from 0 to equilibrium.