Question

Create a supply and demand graph illustrating the scenario, the shock, and the predicted effects on wages and employment:

Scenario #1

Airbnb has housed over 150 million guests in over 65,000 cities since 2008. Do a bit of research on what Airbnb is and how cities and the hotel industry has been responding to it. Using standard supply and demand graphs from the course, model the labor market for hotel workers, pre-Airbnb, and show how Airbnb has likely affected the market.

Scenario #2

We all love to go to little, local ice cream shops. Many of these places hire teenagers over the summer to serve these delicious treats for us. Suppose that a new minimum wage bill comes online this summer, raising the minimum to $10/hour. Create two graphs: 1) model the market for these ice cream shop workers and how shop owners will likely respond to the minimum wage increase immediately after it happens; 2) model what would happen if a company starts using very cheap robot ice cream servers.

Scenario #3

Research and find specific examples of immigrants working as a) substitutes for U.S. workers and b) compliments to U.S. workers. Make sure you put the correct graph with each story.

Scenario #4

Many parts of the U.S. have a shortage of IT workers... not enough people are trained in these fields. Model the market for IT workers. What would happen if a new training program was targeted toward people in Appalachia who have a hard time finding work... the program trains this group to be IT technicians.

Scenario #5

You are looking at the labor market for young, childless males seeking work with low-paying employers (i.e. Wal-Mart). With a supply and demand graph, show the effects of expanding the EITC to these workers. Illustrate an initial equilibrium (before EITC), the shift due to the new EITC expansion, and point out the wage they get paid from the employer and the additional “pay” they get due to the EITC.

Answer 1

Answer)

Scenario #2

With an increase in the minimum wage rate-
1) with respect to ice cream shop workers the demand for them will go down and supply will increase which will result into unemployment. Due to the increase of prices the shop owners will not be hiring much of the work force, which will lead to fall in demand and due to the unutilized labour the supply, will increase.

2) Given a year to adjust the demand will not fall very rapidly and because of which supply will not be affected the shop keepers will hire the kids and hence the increase in wages will not affect the demand and supply curve of the market.

Scenario #3

If immigrants begin to compliment the workforce of US then there would be large number of workforce pool in the market and hence both workforce will exist as a compliment to each other instead of being substitute.

The immigrant workforce will complement each other because it is not possible to replace US workforce or compete against them and also it is difficult to beat the law, which poses a lot of restriction on immigrant workers.

Due to the workforce being complimentary to each other the increase in workforce will complement the US workforce. The wages will tend to remain stable however the employment will suffer as the US worker and immigrants can be used simultaneously.