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November 20, 2022

Define and explain Frictional, Structural and Cyclical unemployment. What is NAIRU?

1. Define and explain Frictional, Structural and Cyclical unemployment. What is NAIRU?

2. Show the effect of a minimum wage on a labour market where the equilibrium wage is below the legislated minimum wage. Use the labour demand and supply model but don’t consider any effects outside of the basic model.

3. Explain the basic Consumption – Leisure choice model. Show what happens to the model if there is an increase in the wage rate. Include the income and substitution effects.

4. Show how to determine the cost minimizing mix of capital and labour using a graph. How would the graph change if the cost of labour rose relative to the cost of capital?

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