LABOR SUPPLY By Gary Becker’s labor-supply theory, which we have studied, labor supply is largely determined...

LABOR SUPPLY

By Gary Becker’s labor-supply theory, which we have studied, labor supply is largely determined by the shadow price of leisure. Due to the Covid-19 crisis, billions of people are locked at home and almost everyone has too much kind of leisure, and therefore, logically, leisure ought to be quite cheap. This clearly has important implications for supply in the labor market. On the other hand, under the horrible shock of the pandemic to business, demand for labor, or alternatively put, opportunities of employment, sharply fall. (Some economists in the International Labor Organization are as pessimistic in expectation as to predict that 1.5-1.6 billion workers in the world will have great difficulty finding employment opportunity within months to come.) This may be interpreted as a remarkable fall of the labor demand curve.

(i) Please make preliminary analysis of the change in labor supply caused by the lockdown.

(ii) Briefly analyze possible outcome of the interaction between the change in demand and the change in supply in the labor market.

Please wirte a 500-1000 words essay based on the two problems above.

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Expert Solution

Rahul Sunny answered 1 year ago

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