Wage and Benefit Determination
Individuals supply labor to the market at a price called the wage rate of labor. How much labor an individual supplies is related to his level of non-labor income, and cost benefits determination of time spent at leisure, vs. work.
A union can raise the wages of those who continue to be employed in a competitive labor market at the expense of the level of employment. So if the competitive equilibrium is at E0 and the wage is w0 employment is q0. If a union enters this market and sets a wage of W1, a new equilibrium will be established, e1. The supply curve has become w1xs0. At the new wage, W1, there will be q1q2 workers...
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