Question

In: Economics

Suppose low skilled labor and capital are substitutes but high skilled labor and capital are complements....

  1. Suppose low skilled labor and capital are substitutes but high skilled labor and capital are complements. Over the past 45 years the price of capital has dropped substantially because of the computer revolution. Draw and explain 2 labor market diagrams
    1. To show what has happened to the demand for high and low skilled labor
    2. Now add new supply curves to your diagrams to show the effect of an increase in the number of high skilled workers and a decrease in the number of low skilled workers.
    3. What has happened to the wage rates of high and low skilled workers? Make sure your answer to (c) is shown in your diagrams.                                  [10 points]

Solutions

Expert Solution


Related Solutions

Consider the markets for low-skilled and high-skilled labor. a. Suppose the government introduces a subsidy to...
Consider the markets for low-skilled and high-skilled labor. a. Suppose the government introduces a subsidy to the employment of low-skilled workers physically paid to firms. (For simplicity, assume the government pays firms some amount for each low-skilled worker they hire.) How will the subsidy affect the employment of low-skilled workers, the wage low-skilled workers receive, and net of-subsidy wage for low-skilled workers paid by firms? Will this policy tend to increase, decreaseor have no effect on income inequality (or is...
Consider the markets for low-skilled and high-skilled labor. a. Suppose the government introduces a subsidy to...
Consider the markets for low-skilled and high-skilled labor. a. Suppose the government introduces a subsidy to the employment of low-skilled workers physically paid to firms. (For simplicity, assume the government pays firms some amount for each low-skilled worker they hire.) How will the subsidy affect the employment of low-skilled workers, the wage low-skilled workers receive, and the netof-subsidy wage for low-skilled workers paid by firms? Will this policy tend to increase, decrease, or have no effect on income inequality (or...
Consider the markets for low-skilled and high-skilled labor in the United States. Describe how each of...
Consider the markets for low-skilled and high-skilled labor in the United States. Describe how each of the following developments is likely to affect the wages of low-skilled workers relative to high-skilled workers. a) There is an increased demand for apps and smart appliances, which are produced by high-skilled workers. b) The government pays employers a subsidy for each low-skilled worker they employ. c) Some low-skilled workers get more education, and so become high-skilled workers.
7) Consider the markets for low-skilled and high-skilled labor in the United States. Draw two graphs...
7) Consider the markets for low-skilled and high-skilled labor in the United States. Draw two graphs how each of the following is likely to affect the wages of low-skilled workers relative to high-skilled workers. a) Suppose that the government decided to approve more H-1B visa for high-skilled workers. In other words, more high-skilled workers come to the U.S. from foreign countries. b) The aging of the U.S. population increases the demand for services such as home health care, home maintenance,...
Suppose that there are two types of workers in the labor market, type A (low skilled)...
Suppose that there are two types of workers in the labor market, type A (low skilled) and type B (high skilled). The market for type A is at equilibrium while the market for type B workers currently exhibits a surplus of workers. Discuss the effect of the introduction of a minimum wage in the market for type A workers on the quality of workers hired in the type A market and on the distribution of workers across the two markets...
Suppose that there are two types of workers in the labor market, type A (low skilled)...
Suppose that there are two types of workers in the labor market, type A (low skilled) and type B (high skilled). The market for type A is at equilibrium while the market for type B workers currently exhibits a surplus of workers. Discuss the effect of the introduction of a minimum wage in the market for type A workers on the quality of workers hired in the type A market and on the distribution of workers across the two markets...
substitutes, complements, or unrelated
substitutes, complements, or unrelated
A firm uses skilled labor, unskilled labor, and capital, and is initially in equilibrium. Suppose that...
A firm uses skilled labor, unskilled labor, and capital, and is initially in equilibrium. Suppose that the wage paid to unskilled labor falls, and that unskilled labor is a substitute in production with both skilled labor and capital. Depict in separate graphs of (a) capital and unskilled labor and (b) capital and skilled labor how the original equilibrium choices change in response to the decline in wages paid to unskilled workers. What are the expected impacts on the wage and...
Suppose there exist two labour markets — one for low-skilled, and one for high-skilled workers. Any...
Suppose there exist two labour markets — one for low-skilled, and one for high-skilled workers. Any low-skilled worker can become a high-skilled worker by investing in education, the cost of which is c. (a) What, if any, wage gap would exist between low- and high-skilled workers in equilibrium? Explain. (b) Now suppose that an improvement in technology raises the productivity of low-skilled workers. Explain the process by which the markets would adjust to a new equilibrium.
Suppose there are two inputs in the production function, labor and capital, which are substitutes. The...
Suppose there are two inputs in the production function, labor and capital, which are substitutes. The current wage is $10 per hour and the current price of capital is $25 per hour. Given the following information on the marginal product of labor and the marginal product of capital, find the firm’s profit-maximizing input mix (i.e. number of workers and units of capital) in the long-run. Show your work and explain. L MPL K MPK 1 125 1 130 2 100...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT