problem set 3-3

Econ 3003

Money and BankingMoney and Banking

Fall 2012

ACTIVITY 3.3 The Phillips Curve Game

Dr. Fusaro

In class we are playing two games. The game is quite simple. Let’s start with game 1. This is a market for labor, so the suppliers are workers and the demanders are employers. Draw a supply and demand curve for labor.

You may draw it by hand and then hand it in to me. Or you may draw it, scan it, and upload it on blackboard. Or you may draw it with Word, Excel, or some other computer program and upload it on blackboard.

After we played game 1 we played game 2. The difference between game 1 and game 2 is the number of workers and number of employers. In game 2 the number of workers is lower than the number in game 1. Using a dashed line, draw the game 2 labor supply on your graph above.

The other difference between game 1 and game 2 is the number of employers. In game 2 the number of employers is greater than the number in game 1. Using a dashed line, draw the game 2 labor demand on your graph above.

Looking at your graph, explain what this tells us about the relationship between unemployment and inflation.

Game1

You are a worker. Go find a job. Negotiate a daily wage and write it down here:

Hint: Jobs are scarce so if you don’t get a job soon you may not get one.

Game 2

You are a worker. Go find a job. Negotiate an hourly wage and write it down here:

Hint: Jobs are plentiful so if the first employer is stingy, you may want to try another.

Game 1

You are an employer. In one hour a worker can make 100 phillips head screwdrivers for you. Materials and overhead cost $8 and you can sell them for $1.50 each. Go find one worker to hire, negotiate a daily wage and write it down here:

Hint: Workers are plentiful so if the first one demands too much money you might want to try another.

Game 2

You are an employer. In one hour a worker can make 100 phillips head screwdrivers for you. Materials and overhead cost $8 and you can sell them for $1.50. Go find one worker to hire, negotiate an hourly wage and write it down here:

Hint: Workers are scarce so if you don’t find one soon you may not get one.