DSE-2010,macro

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DSE-2010,macro

 sir plz explain this question.... Consider an economy with an aggregate production function Y=aK+bL,a,b>0. K is fixed in short run.Perfectly compititive producers take the nominal wage W and price level P as given and employ labour as to maximize profits.this generates the labour demand shedule. the labour supply shedule is Ls=-y+d W/p where y,d>0. Producers and workers have perfect information about P and W. 23.The labour market will clear iff a.  b>y/d b.  bd/y d.  b
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Re: DSE-2010,macro

 plz explain this question.....amit sir
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Re: DSE-2010,macro

 sir plz explain these questions
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Re: DSE-2010,macro

 hi.. question 1) Pls equate MRPL = W for firms profit max. P * MPL = W P*beta = W MPL would be Marginal productivity.  sub that W in Ls and make sure its greater than 0. 2) get the W accordingly and get Ls from it then sub into Y then solve for the remaining questions. Keep in mind that Y would be on horizontal axis so increase in Y would make the graph move right for constant P and increase in P would move graph up for constant Y
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Re: DSE-2010,macro

 In reply to this post by sonudelhi sonu for 24,labor mkt to be cleared its necessery that labor supply nd dd intercect...in this case labor dd curve is horizontal....option a is required to ensure that ld &ls intersect... . in question 25.....i am convinced that As wud be vertical for high prices and downward sloping for mid prices but why is it vertical for low prices.....????????
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Re: DSE-2010,macro

 @ deepika ...can u explain why is as curve shaped so?
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Re: DSE-2010,macro

 I think the As curve would be in the form Y = alpha*K  -beta*gama + beta*delta*W/P My intuition was like first 2 options are incorrect as for high values..u get a constant Y which should be vertical as its plotted on x axis. For mid values slop would be negative.. dy/dx I concluded from above that C is right as D says positve slope. and convinced myself that for low values of p u again get a constant Y. sometimes you go according to options and you will be right... Even i am not sure.. BTW would you care for my other post! regarding Q 42 2010 DSE.