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

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]

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Expert Solution

Rahul Sunny answered 1 year ago

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