Aim for FiveMicroeconomics

Short free-response question

The market for carpenters

  • Unit 5
  • 5 points
  • About 12 minutes

A shorter question with a few lettered parts on one situation, often built on a table, a payoff matrix or a given or described graph. You make claims, explain them, calculate a value, or describe a labeled graph and show a change on it. On the exam: Questions 2 and 3 of 3 in Section II; 5 points each, a quarter of the section score each. About 12 minutes suggested for each. Four-function calculator allowed.

The question

Furniture makers hire carpenters in a perfectly competitive labor market and sell furniture in a perfectly competitive product market. Carpenters use power saws to do their work.

Suggested time: 12 minutes

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Part (a)

1 point

Explain why the demand for carpenters is called a derived demand.

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Part (b)

1 point

The price of furniture increases. Identify the effect on the demand for carpenters. Explain.

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Part (c)

1 point

Assume instead that power saws are a complement to carpenters' labor, and the price of power saws falls. Identify the effect on the demand for carpenters. Explain.

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Part (d)

1 point

Suppose a new training program increases the number of qualified carpenters. Identify the effect on the equilibrium wage and the equilibrium quantity of carpenters hired in the labor market.

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Part (e)

1 point

Explain how the change in the market wage in part (d) affects the number of carpenters hired by an individual furniture maker.

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