Question

The figures below show the supply and demand for labor in the software development industry.

The figures below show the supply and demand for labor in the software development industry. Wage ($ thousands) 2001 TTTTT 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 Software developers (thousands) Instructions: Round your answers to the nearest whole number. a. The equilibrium wage is $C 90 thousand and the equilibrium quantity is 40 thousand workers. In each of the following scenarios, draw the shift in the supply or demand curve and state whether the resulting equilibrium wage and quantity increase or decrease. b. Suppose the government offers more scholarships to students studying computer programming. This increases labor in the software development industry. the supply of Instructions: Use the tool provided (S2) to draw the new supply curve. Answers will be graded based on the direction of the shift, not on specific points.

Answer 1

The equilibrium wage is determined where the labour supply and the labour demanded are equal.

The equilibrium wage is 90 thousand and the quantity of 40 thousand workers.

If the government facilitate more students to study the computer programs that would increase the number of computer experts, so here the supply of the labour will increase and this is a rightward shift of the labour supply curve. When the labour supply curve shifts to the right the equilibrium wage decrease and the equilibrium quantity increases.

This is shown by the below diagram.

Wage Q Q1 Quantity

The marginal product of labour is the made to the total product when an additional unit of the labour is employed, an increase in the marginal product means the additional labour contributes more to the total product than the previous labour. So this is increase in the efficiency of labour, when the marginal product of labour increases the firms demand more workers, so here the demand for workers increases. This is a rightward shift of the labour demand curve.

The equilibrium wage and the quantity increases.

Wage DU DL QQ1 Quantity