If the population of the United States suddenly grew because of a large wave of immigration,...

If the population of the United States suddenly grew because of a large wave of immigration, what would happen to wages? What would happen to the rents earned by the owners of land and capital?

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Expert Solution

If the population of US increases due to immigration, then it means that the supply of labour increases. An increase in supply of labour would shift the supply curve of labour to the right.

This rightward shift would lead mean a decrease in wages. Also otherwise as well when th esupply of labour would be large then wages would reduce because when unemployment would be high or competition is more , people are willing to work at lower prices.

So the wages tend to decline.

On the other hand , the rent earned by owners of capital and land would increase because to accomodate such large labour force , the capital and labour needs to be increased which would in a way benefit the owners of capital and land.

More people would want land for housing and purposes which would increase the earnings of the land owners.

Morever in the workarea, because the labour has increased the capital would also be increased in the proportion in order to keep the output constant. So the capital owners are also better off.

Hence both the land and capital owners are better off while the wages would reduce and competition among the workers increase.

(You can comment for doubts)

Rahul Sunny answered 1 year ago

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