(a) An increase in the demand for labor by local firms shifts demand from DL₁ to DL₂, resulting in a short-run increase in employment and wages from L_A to L_B and W_A to W_B, respectively. In the long run, workers from other cities migrate to the area. As a result, the long-run supply curve SL_LR is relatively elastic, and the quantity of labor supplied increases to L_C, pushing down wages to their original level at W_C = W_A.(b) The influx of new workers has general equilibrium effects that extend beyond the labor market. As a result of the migration to the city, demand for housing DH₁ shifts out to DH₂. In a market such as Buffalo where the supply of housing (SH_Buffalo) is relatively elastic, housing prices stay constant at P₁ = P_Buffalo2. In New York City, the relatively inelastic supply of housing (SH_NYC) means that housing prices will rise to P_NYC2.(c) New York City’s relatively steeper long-run labor supply curve (SL_LR,NYC) reflects the increase in housing prices seen in panel b, while Buffalo’s long-run labor supply curve (SL_LR,Buffalo) is similar to the flat supply curve in panel a. Because of the effects of the housing market on the labor market, Buffalo will experience a greater increase in employment and a smaller increase in wages than New York City.