Question

Borjas (2003) argues that immigration into the U.S. increased the supply of unskilled workers by 11% between 1980 and 2000, and reduced the wage of locally-born unskilled workers by 3.2%.  Does this information allow us to make any inferences about the elasticity of supply or demand?  Which curve (or curves) changed, and why?  Illustrate with a supply and demand diagram.  

Answer 1

The increase in supply of labour by 11% and decrease in the wage of locally born unskilled workers by 3.2% shows that demand for labour is elastic because a slight reduction in wage rate accommodated a large supply of labour.

Here the supply curve has shifted to right due to immigration into US.