Think of events that might lead to a leftward shift in the labor supply curve accompanied...

Think of events that might lead to a leftward shift in the labor supply curve accompanied by a rightward shift in the labor demand curve. With the help of a graph, discuss the effects on the equilibrium level of employment and wage.

Solutions

Expert Solution

A fall in immigration from other countries will reduce labor supply in a country, causing a leftward shift of labor supply curve. At the same time, increase in consumer income will increase the demand for a normal good, which will cause its producers to increase production, increasing their demand for labor, shifting labor demand curve rightward.

A leftward shift of labor supply curve will increase wage rate and decrease employment, and a simultaneous rightward shift in demand curve will increase wage rate and increase employment. The net effect is a definite increase wage rate. But employment may rise, fall or stay unchanged on basis of whether leftward shift in labor supply curve is lower, higher or equal in magnitude to the rightward shift in labor demand curve.

In following graph, wage rate (P) and employment (Q) are depicted vertically and horizontally respectively. D0 & S0 are initial labor demand & labor supply curves intersecting at point A with initial wage rate P0 and initial employment Q0. As D0 shifts right to D1 and S0 shifts left to S1, they intersect at point B with higher wage rate P1 and new employment level Q1. In the graph, leftward shift in supply curve is less than rightward shift in demand curve, so employment is higher at Q1.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Which of the following would cause a definite leftward shift of the supply curve? an increase...

Which of the following would cause a definite leftward shift of the supply curve? an increase in the cost of an input and an expectation by firms of a lower price an increase in the price of a complement in production and a decrease in the cost of an input an increase in taxes and an increase in the number of firms an increase in the price of a substitute in production and a decrease in productivity

a) Discuss, with examples, factors or events that might shift the short run aggregate supply curve....

a) Discuss, with examples, factors or events that might shift the short run aggregate supply curve. [10 marks] b) Imagine an economy is in long run equilibrium. Now suppose that firms experience an increase in their cost of production (say, due to a natural disaster). i. Explain, with graphs, the macroeconomic impact of such an increase in production costs. ii. Describe how policymakers could use fiscal policy to counteract the effects of increased cost of production. [15 marks]

Discuss, with examples, factors or events that might shift the short run aggregate supply curve. Imagine...

Discuss, with examples, factors or events that might shift the short run aggregate supply curve. Imagine an economy is in long run equilibrium. Now suppose that firms experience an increase in their cost of production (ex: due to a natural disaster). Explain, with graphs, the macroeconomic impact of such an increase in production costs and Describe how policymakers could use fiscal policy to counteract the effects of increased cost of production.

The determinants of supply (factors that lead the supply curve to shift) are number of sellers,...

The determinants of supply (factors that lead the supply curve to shift) are number of sellers, technology, resource prices, taxes and subsidies, and expectations of producers. EXPLAIN HOW EACH OF THESE DETERMINANTS AFFECT SUPPLY.

State whether the labor supply curve, labor demand curve or neither of the two will shift...

State whether the labor supply curve, labor demand curve or neither of the two will shift in the current scenario when the government has mandated workplace closures. If there is a shift, is the shift to the left or to the right? Illustrate your answer with a figure and show what happens to the full-employment level of employment following the shifts, if any. Label the axes and curves clearly

In cases below, answer how the aggregate demand curve would shift: Leftward, Rightward, or No shift....

In cases below, answer how the aggregate demand curve would shift: Leftward, Rightward, or No shift. a. Consumers became pessimistic about future: b. Firms became more bullish about future : c. Government changed its suppliers from foreign ones to domestic ones:

A looseningloosening of the labor market will cause A. the aggregate supply curve to shift down....

A looseningloosening of the labor market will cause A. the aggregate supply curve to shift down. B. the aggregate supply curve to shift up.the aggregate supply curve to shift up. C.the aggregate demand curve to shift left.the aggregate demand curve to shift left. D.the aggregate demand curve to shift right. When the labor market is? tight, A. wages? fall, and the aggregate supply curve shifts down. B.wages? rise, and the aggregate supply curve shifts down. C.wages? rise, and the aggregate...

1. which of the following would cause a definite leftward shift of the demand curve? a)...

1. which of the following would cause a definite leftward shift of the demand curve? a) an expectation by consumers of a lower price and an increase in the price of a compliments b) an expectation by consumers of lower income and an increase in the price of a substitute c) a decrease in the number of consumers and a decrease in income (assume inferior good) d) a decrease in income and a positive change in consumer tastes 2. When...

What are the 4 economic events that can shift the supply curve? Give an example of...

What are the 4 economic events that can shift the supply curve? Give an example of for each economic situation that will shift the supply curve.

In each of the following scenarios, state whether the labor supply curve would shift to the...

In each of the following scenarios, state whether the labor supply curve would shift to the left, to the right, not shift at all, or if the shift is ambiguous because there is more than one effect and they would move the curve in opposite directions. (a) The stock market rises sharply. (b) Fewer teenagers work while in school than before. (c) A large fraction of the population flees the country because of a bird flu epidemic. (d) The expected...

Subjects