Equilibrium Point A in Figure 2.8: Structural Unemployment at the Nash Equilibrium
In the equilibrium shown in Figure 2.8, the wage-setting and price-setting curves intersect at point A. This point represents a Nash equilibrium with an employment level of 80 and a real wage of 0.6λ. Given a total labor supply of 90, this equilibrium results in 10 individuals being unemployed. This persistent unemployment at the equilibrium is a form of structural unemployment. The real wage paid to workers is 60% of the average product of labor (λ).
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Ch.2 Unemployment, wages, and inequality: Supply-side policies and institutions - The Economy 2.0 Macroeconomics @ CORE Econ
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Ch.1 The supply side of the macroeconomy: Unemployment and real wages - The Economy 2.0 Macroeconomics @ CORE Econ
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