Question

1. Answer the following questions:

(a) How can technology affect elasticity for labor?

(b) How can specialization and education affect the elasticity for labor?

(c) How could the government restrict foreign trade, and when would implementing such restrictions be beneficial?

Answer 1

(a) Technology innovations can act as either substitutes for or complements to labor. When technology acts as a substitute, it replaces the requirement for the number of workers an employer required to hire. An increase in the availability of specific technologies can raise the demand for labor. When technology acts as a complement to labor will raise the demand for specific types of labor, leading to a rightward shift of the demand curve. A better technology will raise the demand for skilled workers who know how to use technology to improve the productivity at workplace. Those workers who do not adapt to technology changes will experience a decline in demand.

　

(b) An educated and well-trained workforce results to a rise e in the demand for that labor by employers. Increased productivity levels within the workforce will lead to shift the demand for labor to the right. On contrary if workforce is not educated or well-trained, employers will not hire from within that labor pool, because it will require them to spend a significant amount of money and time training that workforce. Demand for such will shift to the left.

　

(c) Foreign trade restrictions are government-induced restrictions on international trade that generally decrease overall economic efficiency. This benefits domestic producers as they can sell goods at a higher price. Restriction will act as a kind of buffer to protect fledgling domestic industries. Such restrictions can help protect employment since it can become hard to compete against the cheap foreign labor. Furthermore, the country's security would be threatened if the nation excessively depended on foreign powers as the primary source of strategic materials. Thus the government restrict foreign trade for the preservation of job, ensuring national security, increase national revenue and improve the consumption of local goods.