Question

12. As a result of migration, the employers in North: a. lose $131.25 million. b. gain $31.25 million. c. gain $162.5 million. d. lose $100 million. The figure given below represents the effects in the labor markets due to migration. Here the world has been divided into a high-income “North” (left panel) and a low-income “South” (right panel). Dn and Sn are the labor demand and the labor supply curves in North. Ds and (Sr + Smig) are the labor demand and pre-migration labor supply curves in South. Sr is the post-migration labor supply curve in South. The value c is the cost of migrating.

Wages (S per hour) Wages (S per hour) North South 8.00- 6.73 (S.+ Smig) n4.23 3.00 90 120 140 Workers 80 110 130 Workers (millions) (millions)

Answer 1

According to the figure,

As a result of migration, the employers in North gain $162.5 million.

Ans is c) gain $162.5 million

Explanation:

As the result of migration, now employees are available at 6.75 which is less than earlier equilibrium price of $8 and also the quantity of labor increase from 120 to 140.

So employers of North gain the area a + area b.

Area a = (8-6.75)*(90) + (1/2)*(8-6.75)*(120-90) = 131.25

Area b = (1/2)*(8-6.75)*(120-90) + (1/2)*(8-6.75)*(140-120) = 31.25

Total Gain = $162.5