Demand and Supply Equations with Equilibrium and Graphing
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1. It has often been said that craft unions (electricians, carpenters, etc.) possess considerably greater power to raise wages than do industrial unions (automobile workers, steel workers, etc.). How would you explain this phenomenon in terms of demand elasticity?
2. What would you expect to happen to spending on food at home and spending on food in restaurants during a decline in economic activity? How would income elasticity of demand help explain these changes?
3. Please see attachment for question #3
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Solution Summary
This is a step-by-step computation of the demand and supply equations including equilibrium and graphing.
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1. It has often been said that craft unions (electricians, carpenters, etc.) possess considerably greater power to raise wages than do industrial unions (automobile workers, steel workers, etc.). How would you explain this phenomenon in terms of demand elasticity?
Since they are organized by craft, or specific work function, craft unions have the greater advantage of paralyzing the operation of an establishment or industry. Their work is more specialized compared to members of the industrial unions where membership is open to workers regardless of skill or trade.
Craft unions are more needed in every industry than industrial union, thus, they are able to dictate wages. This means that the industry's demand for craft workers is inelastic which implies that whatever is the salary demanded by the craft workers, the industry obliges.
On the other hand, the firm's demand for industrial union workers is elastic which means that companies would tend to ignore their request for a wage hike.
The difference is in the type of job that the craft workers possess. They are more specialized ...
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