Question

Using a graph, show how each of the following labor markets (assumed to be competitive and...

Using a graph, show how each of the following labor markets (assumed to be competitive and initially in equilibrium) is affected by the following changes. Explain your reasoning fully

a. Labor market for math and science teachers.Wages available in private industries utilizing these skills rise.

b. Labor market for university professors. College enrollments expand.
c. Labor market for low-skilled workers. The 1996 federal welfare legislation requires that a much larger fraction of welfare recipients work than in the past.

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Answer #1

(a) Supply of labor in academic industry fall, since teachers move to private industries being attracted by higher wage offered by private sector. Therefore, in academic industry, labor supply curve shifts to left and in private industry, labor supply curve shifts to right.

(b) Higher college enrollments will increase the demand for labor in university professors' labor market. The labor demand curve will shift to right, raising wage rate and equilibrium quantity of labor.

(c) Supply of low-skilled workers will rise, because welfare recipients mostly comprise lower-educated workforce. Labor supply curve shifts to right, decreasing wage rate and increasing quantity of labor.

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