Perfect competition is the ‘supply and demand’ model that is often used to(inaccurately) represent all of economics. Supply is simply the aggregation ofindividual firms’ supply curves, which, in turn, are nothing more than their marginalcost curves. Demand tells us how much consumers will purchase at different prices.Note: supply curves assume that producers have no control over prices and demandcurves assume the same for consumers. That is what economists mean when theysay ‘the price is set in the market.’ For other market structures, the price is often setin someone’s office.Labor markets are often good examples of perfect competition. There are manysuppliers (the potential workers) and, usually, many buyers (the firms). While laboris not homogeneous across all labor markets, it can be homogeneous if the work isdefined narrowly enough.Suppose the market for nurses can be modeled using supply and demand (themarket is perfectly competitive). There are a large number of hospitals, doctors’offices, clinics, etc., so that no individual employer has an impact on the marketwage. The nurses are not unionized so they individually have no impact on thewage.Demand is given as Qd = 24,000 – 320W, where Qd is the quantity demanded (infull-time equivalents) and W is the hourly wage rate.Supply is given as Qs = -18,000 + 1250W, where Qs is the quantity supplied.1. Find the equilibrium wage rate. This is done by setting the quantity demandedequal to the quantity supplied and algebraically solving for W. That is, solve thefollowing equation for W:

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