Labor Economics and Bonded Labor

This economics assignment analyzes the impact of eliminating bonded labor on the Australian fig market. It examines how reduced labor costs might affect prices, domestic consumers, producers, and society's overall well-being. The assignment also delves into the ethical considerations surrounding bonded labor and proposes potential anti-slavery measures to prevent its continuation.

ECONOMICS

TABLE OF CONTENTS
PART 1............................................................................................................................................1
Q1................................................................................................................................................1
Q2................................................................................................................................................1
Q3................................................................................................................................................2
Q4................................................................................................................................................3
Q5................................................................................................................................................3
Q6................................................................................................................................................3
Q7................................................................................................................................................4
Q8................................................................................................................................................4
PART 2............................................................................................................................................4
Q1................................................................................................................................................4
Q2................................................................................................................................................5
Q3................................................................................................................................................6
PART 3............................................................................................................................................6
Q1................................................................................................................................................6
Q2................................................................................................................................................7
Q3................................................................................................................................................8
Q4................................................................................................................................................8
Q5................................................................................................................................................9
Q6..............................................................................................................................................10
Q7..............................................................................................................................................10
Q8..............................................................................................................................................10
Q9..............................................................................................................................................11
Q10............................................................................................................................................11

REFERENCES..............................................................................................................................12

PART 1
Q1
D = 60,000 – 5,00W
S = 5,000 – 35,000
At the equilibrium price, demand and supply becomes equal (Bettendorf, Jongen and
Muller, 2015), henceforth, equilibrium price is determined as follows:
60,000 – 5,000W = 5,000W – 35,000
=-5,000W -5,000W = -35,000+- 60,000
= -10,000W = -95,000
= W = 95,000/10,000
W = 9.5
Thus, at wage rate 9.5/hour, both demand and supply will be equal to each one.
Quanity of labor demand = 60,000 – 5000(9.5) = 12,500
Quantity of labor supply = 5000(9.5) – 35000 = 12,500
Q2
1 | P a g e

(A) Consumer surplus: Area WDE
(B) Producer surplus: Area SWE
(C) Total surplus: Consumer surplus + Producer surplus SDE
Q3
2 | P a g e

(A). At the minimum wages rate to 11/hour, demand got decreased from Q0 to Q1 whereas supply
has been increased from Q0 to Q2 shown in the illustration (Blau, Ferber and Winkler, 2013).
(B) Demand = 60,000 -5,000(11)
= 60,000 – 55,000
= 5,000
Supply = 5000(11) – 35,000
= 55,000 – 35,000
= 20,000
(C) Over-supply presented in the graph clearly by the area of Q1D1S1Q2 at the quantity demand of OQ1
whereas supply is OQ2 (Brue, McConnell and Macpherson, 2016).
Q4
Q5
If government impose minimum wages to 11/hour then in such situation workers will
have better off because it reduces gender diversity by paying both male and female workers
equal minimum wages rate (Erosa, Fuster and Kambourov, 2016).
Q6
From assessment, it has been assessed that there is no significant impact of resources lost
in job search on consumer, producer and total surplus.
3 | P a g e

Q7
Minimum wage ethically is justified because it ensured that misuse of employees will not
be done and according to needs and requirements by the business firms. Minimum wage rate
ensured that employees will earn required amount of money in proper manner. Hence, minium
wage case is justified.
Q8
For improving living of unskilled people minimum wage rate provision can be jusftied
but condition must be placed that if unskilled employee will do skill improvement then only
minimum wage rate will be applied.
PART 2
Q1
4 | P a g e
Illustration 1: Graphical representation of change in price and quantity

Q2
Table 1: Income elasticity of demand
Particulars Beginning Ending Average Percentage
change
Quantity 10000 12000 11000 -18.18%
Income 800 900 850 -11.77%
Income elasticity of demand 1.545
Income elasticity of demand =
The income elasticity of demand is more than 1. It shows that a change in income of the
consumer have direct impact on the demand of the pocket calculators as well. Moreover, it
5 | P a g e
Illustration 1: Increase in income of consumer

interprets that the demand is highly elastic as a bit of change in the income can increase or
decrease the overall demand of the product (Kabatek, Van Soest and Stancanelli, 2014.
Q3
Table 1: Price elasticity of supply
Particulars Beginning Ending Average Percentage
change
Quantity 10000 11000 10050 -9.524%
Price 20 24 22 -18.182%
Price elasticity of supply 0.52
It shows that price elasticity of supply is less than 1 which means that the supply is elastic
(Price elasticity of demand and price elasticity of supply, 2017). It shows that when the price of
calculator was 20, quantity supplied to the consumer is 10000. Further, when the prices increased
to 24 the quantity supplied increased to 11000. It shows that percentage change in price is lower
than the percentage change in quantity (Ruttan and Thirtle, 2014). A change in price will have
proportionately less impact on the percentage change in supply of pocket calculators.
PART 3
Q1
Figure 1Equilibrium price and quantity
6 | P a g e

Equilibirum price and quantity is 60 because at this point demand and supply curves are
intersection each otheer. Hence, it is considered equilibrium point for demand and supply
(Kabatek, Van Soest and Stancanelli, 2014).
Q2
Table 1Size of customer, producer and total surplus
Consumer surplus
Max price 80
Equilibrium price 60
Demand 1.6
Consumer surplus 20
Size of consumer surplus 16
Producer surplus
Max price 60
Min 10
Equilibrium price 60
Demand 1.6
Surplus amount 50
Producer surplus 40
Total surplus 56
7 | P a g e

Q3
Figure 2Demand and supply curve
Supply will be 1.6 and demand will be 2.4 in case price of 40 is charged on the relevant item in
Australian market.
Q4
Table 2Calculation of surplus amount
Consumer surplus
Max price 80
Equilibrium price 40
Demand 1.6
Consumer surplus 40
Size of consumer surplus 32
Producer surplus
Max price 40
Min 10
Equilibrium price 40
Demand 1.6
Surplus 30
Producer surplus 24
8 | P a g e

Total surplus 56
Firms are not better off because now surplus amount reduced for them from 40 to 24. Society is
better off as due to decline of equilibrium price from 60 to 40 more quantity can be purchased.
Workers are not better off because firms are earning less revenue and if downturn will happen in
economy they may loose their jobs.
Q5
Figure 3Demand and supply curve on imposition of tariff
On imposition of tariff of 10 on price demand and supply will change. At price of 40
supply was 1.3 which increased to 1.7 at price of 50. Hence, domestic supply will increase due to
elevation in tariff rate. Import which is reflected by demand was 2.2 at price of 40 and it
decreased to 2 when tariff of 10 charged and price is 50. Hence, it can be said that due to
imposition of tariff domestic product supply will increase and foreign product demand will
decrease.
9 | P a g e

Q6
Table 3Surplus amounts on tariff increase
Consumer surplus
Max price 80
Equilibrium price 50
Demand 1.6
Surplus 30
Size of consumer surplus 24
Producer surplus
Max price 50
Min 10
Equilibrium price 50
Demand 1.6
Surplus 40
Producer surplus 32
Total surplus 56
In case of firms producer surplus is 32 and same was 24 in Q4. It can be said that firms
benefit from elevation in tariff. In case of customers surplus amount is 24 and it was 32 in case
of Q4. It can be said that customers are not beneficial in this situation as gap between amount
that they have to pay and prepared to pay reduced. Workers may not be beneficial because if
demand declined they may receive less job opportunities.
Q7
The most ethically preferred for the Australian economy is free trade economy. It helps
the country to bring globalization and expand in the manner through which all the resources of
the nation can be utilized. Hence, it is the best way to expand trade.
Q8
There will be a great impact on the prices of Australian fig market. Reduction in bonded
labour will ultimately increase the prices of the products in the fig market. Since, the cot of the
figs will increase due to major expenses in the labours as well. Hence, The project may be good
social responsibility towards the International Labour organization But it may lead to increase in
prices.
Q9
1) Domestic consumers: The consumer has to pay more to get fig from the market.
10 | P a g e

2) Domestic producers: The producers have to invest more in the manufacturing of the figs
which will ultimately increase the overall costing of the entity (Blau, Ferber and
Winkler, 2013).
3) Society better off: The situation will be better for the society as bonded labour will be
decreased. It will help in promoting free trade in the country.
The difference between trade off efficiency and fairness is that efficiency helps in
optimum utilization of resources and fairness helps in getting freeness to the people working
under it. Hence, it is difficult to have efficient and fairness at the same time where bonded labour
is still supported by the country.
Q10
Slavery is termed as buying and selling people for the objective of forced labor which is
unethical. it can be avoided by following ethical principles and morals which aims at prohibiting
employee exploitation (Foley, 2014). An ethical approach (Anti-slavery) can be used to prevent
forced labor, as per which, if any one is founded under default of the law, than the employee can
be terminated immediately.
11 | P a g e

REFERENCES
Books and Journals
Bettendorf, L.J., Jongen, E.L. and Muller, P., 2015. Childcare subsidies and labour supply—
Evidence from a large Dutch reform. Labour Economics. 36. pp.112-123.
Blau, F.D., Ferber, M.A. and Winkler, A.E., 2013. The economics of women, men and work.
Pearson Higher Ed.Pigou, A.C., 2013. The economics of welfare. Palgrave Macmillan.
Brue, S.L., McConnell, C.R. and Macpherson, D.A., 2016. Contemporary labor economics.
McGraw-Hill Education.
Erosa, A., Fuster, L. and Kambourov, G., 2016. Towards a Micro-Founded Theory of Aggregate
Labour Supply. The Review of Economic Studies. 83(3). pp.1001-1039.
Kabatek, J., Van Soest, A. and Stancanelli, E., 2014. Income taxation, labour supply and
housework: a discrete choice model for French couples. Labour Economics. 27. pp.30-43.
Ruttan, V. and Thirtle, C., 2014. The role of demand and supply in the generation and diffusion
of technical change. Routledge.
Online
Foley, P., 2014. Modern Slavery and Role of Business. [Online]. Available through:
http://www.ethicalcorp.com/supply-chains/modern-slavery-and-role-business.
[Accessed on 29th September 2017].
12 | P a g e