Question

4. Consider the market for high skilled labor (college educated). (a) Draw a supply and demand diagram depicting the market in equilibrium. Who are the buyers of labor? Who are the sellers? What do we typically call the "price" of labor? (b) Suppose the demand for high skilled labor increases. Show this in your diagram. How does the affect the equilibrium "price" and quantity? (c) What are some real-world examples of things that might increase the demand for highskilled labor? Be specific.

Answer 1

Ans) 1) Supply of labour is done by workers who are willing to provide their labour in the market for factors of production. While demand is from the firms who produce goods and services.

Firms employ labour in exchange for wages. The price, therefore, in labor market is known as Wage.

Qe hours/workers

2) When demand for workers increase, demand curve will shift to the right and both wage and quantity of labour employed will increase.

Qe Q ' hours/workers

3) Demand for labour is derived demand i.e when there is increase in demand for a product, demand for labour also increases.

Some real world examples which increase the demand for skilled workers are÷ a) cloud computing is very popular these days and hence the demand for engineers will increase. b) with increasing demand for healthcare, demand for doctors is also increasing.