5 Improved Safety and Wages. Consider an occupation that initially has a relatively high rate of nonfatal injuries. The equilibrium wage is $20 per hour, and the equilibrium quantity is 100,000 hours....

5 Improved Safety and Wages. Consider an occupation that initially has a relatively high rate of nonfatal injuries. The equilibrium wage is $20 per hour, and the equilibrium quantity is 100,000 hours. Suppose a new safety device cuts the injury rate in half, and the supply of labor increases by 12 percent: The labor supply curve shifts to the right by 12 percent.

a. Use a graph to show the effects of the safety device on the equilibrium wage and employment.

b. Suppose the elasticity of supply of labor is 3.0 and the elasticity of demand is 1.0. Use the price change formula discussed in an earlier chapter on elasticity to compute the change in the equilibrium wage.

c. Suppose the demand curve you’ve drawn is a longrun demand curve. Explain the roles of the output effect and substitution effect on the change in the quantity of labor demanded.