Question
In: Economics
Consider the market for labour. Using a supply and demand diagram, show the impacts of the...
Consider the market for labour. Using a supply and demand diagram, show the impacts of the following events on the market’s equilibrium wage and labour quantity.
(a) An increase in immigration. (10%)
(b) An infectious disease kills 30% of the workforce.
(c) Workers gain skills that make them more productive
Solutions
Expert Solution
In each graph, wage rate (P) and quantity of labor (Q) are depicted vertically and horizontally, respectively. D0 and S0 are initial labor demand and supply curves intersecting at point A with equilibrium wage rate P0 and quantity of labor Q0.
(a)
An increase in immigration will increase labor supply, shifting labor supply curve rightward, decreasing wage rate and increasing employment.
In following graph, S0 shifts right to S1, intersecting D0 at point B with lower wage rate P1 and higher employment Q1.
(b)
Loss of workforce decreases labor supply, shifting labor supply curve leftward, increasing wage rate and decreasing employment.
In following graph, S0 shifts left to S1, intersecting D0 at point B with higher wage rate P1 and lower employment Q1.
(c)
An increase in labor productivity increases the demand for labor, shifting labor demand curve rightward, increasing both wage rate and employment.
In following graph, D0 shifts right to D1, intersecting S0 at point B with higher wage rate P1 and higher employment Q1.
Rahul Sunny answered 2 years agoRelated Solutions
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Consider the following demand and supply equations in the market for labour. Supply: W = 10...
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