Acme Umbrella Company Case Study - Changes Affect The Demand for Labour - Management Assignment Help

Assignment Task

changes affect the demand for labour 
1. Fbr each of the following examples, identify the case with the more inelastic labour demand curve, with elasticity for each evaluated at a point where the wage rate is $20 per hour. Briefly justify your answer for each example. (a) The demand for workers in a factory producing insulin versus the demand for workers in a factory producing balloons for children's parties.

(b) The demand for workers in a factory that is capital-intensive versus the demand for workers in a factory that is labour intensive.

(c) The demand for workers performing a task that can be easily automated versus the demand for workers doing a task that requires a high degree of human judgment. 
2. (Based on Chapter 5, Problem 1 of Benjamin et at, 2017) The Acme Umbrella company maw the following production function to produce umbrellas: 

Q Is the number of umbrellas produced, K is the amount of capital used, and N is the amount of labour (measured in hours). It can be shown that the marginal physical product of labour is given byl 
Al PP?' I. Acme currently has I unit of capital. The cost of capital is $15 per unit. Umbrellas are sold in a competitive market and the price of each umbrella is $10. Use the information provided to answer the following questions: (a) How much labour does the firm employ when the wage rate is 95 per hour? flow many umbrellas does the firm produce? What is the average revenue product of labour? What are Acme's profits? How much does it earn over what it would have if it shut down instead?

(b) How much labour does the fine employ when the wage rate is $10 per hour? How many brellas does the firm produce? What is the average revenue product of labour? What are Acme's profits? How much does it earn over what it would have if it shut down instead?

(c) Sketch Acme's labour demand curve and carefully indicate the points on the demand curve corresponding to the wages given in parts (a) and (b). How do Acme's profits vary along the labour demand curve? 
 

3. Briefly explain how each of the following changes affect the demand for labour. In each case, assume the firm is selling its output in a perfectly competitive market:

(a) Technological improvements increase the marginal physical product of labour.

(b) The firm is currently paying its employees the minimum wage. The provincial government increases the minimum wage.

(c) Increased international competition reduces the price of the good being produced. 
 

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