Question

Explain the factors of the shift in demand and supply curves for a city. Assuming an increase in demand for export goods, explain the change in demand curve and labor supply, if any.

a) Increase in demand for export goods

b) Increase in labour productivity generates lower cost, lower output price, and more output produced

c)Decrease in taxes decreases cost and output price, increasing output and labor demand

d) Improve amenities such as environmental quality

e) Decrease disamenities such as crime

f) Decrease residential taxes such as property tax or sales tax

g) Improve residential public services

Answer 1

There are many factors which affect the demand and supply curves of a particular place. When factors like income, tastes and preferences, price of the commodity, relative prices, size of the population, expectations and even weather conditions affect the demand, supply if affected by various factors including the price of factor inputs, demand for commodities, production costs, government policies and competition exists in the market. Even when the demand and supply factors are affected differently they have many things in common.
An increase in demand for export goods due to various factors will raises the supply of products thus increasing thus increasing for the demand of labor in the market. Labors would like to supply more when they are provided with more wages. Also, the market will increase the demand for labor when the demand for their commodity increases, shifting the supply curve of labor to right.
Increase in labor productivity could reduce the price of commodities leading to increase in the rate of output produced. This will create further demand for the goods and further supply of the same.
Reduction in taxes could reduce the cost of production thus reducing the per unit price of the commodity. This also shifts the demand curve and the supply curve at an increasing rate.
Environmental quality reduces the risk of production. Safety environment could contribute more to an efficient production process. It will reduce the costs of production and increasing the demand and supply.
Reduced rate of crimes increase the demand for labor much more freely. An increased rate of crime could reduce the reputation and efficiency of the economy leading to a reduction in the demand for their commodities and thus production. Thus, decreased crime rate could encourage economy to demand and supply better.
Decreases in residential taxes such as property and sales tax could increase the disposable income in the hand of consumers and producers. This may leads to further demand and investment helping the economy to consume and produce more.
Improvement in the residential public services can increase the welfare of the people by reducing their spending on that. Improvement in residential public service will increase the purchasing power of people by reducing their area of spending. This can increase demand for different commodities and further demand for the labor in the market.
These all factors affect the demand to shift upwards creating further scope in supply and the shifts in labor supply curves with increased efficiency of the economy.