Chapter 1. Chapter 11b

Step 1

Solved Problems

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You must read each slide, and complete any questions on the slide, in sequence.

Question

In this graph, the wage (W) is on the nuXQcvAC77pN1DdUIeXo/i8YfD3P69+u axis and the quantity of labor (L) is on the cMwBO5oKLzuBuAJdHG9bDa6d3EExJ9fC axis.

The graph shows demand and supply curves. The horizontal axis is labeled L and the vertical axis is labeled W. The supply curve is an upward sloping line, while the demand curve slopes downwards. They intersect approximately in the middle.

For any market, the price goes on the vertical axis and quantity goes on the horizontal axis. Here, the price of labor is the wage (W), and the quantity of labor is denoted by L.

Step 2

Question

Suppose that in this labor market, some jobs are restricted to current residents of this city who have lived there for at least one year. Other jobs are open to anyone, regardless of the city of residence.

Two graphs showing demand and supply curves are shown. The horizontal axis of both graphs are labeled L and the vertical axis, W. The supply curve on the first graph is an upward sloping line that intersects the downward sloping demand curve towards the left. The supply curve on the second graph intersects the demand curve towards the right.

We would expect the market for jobs for all residents to be depicted on the sMSe1gALxiMKb76HKkW4BEevjolksEF3 graph, and jobs for only city residents to be depicted on the m8kAO09C4JJL8fq7KZw0Z1vHgCfTMlGg graph above.

There are fewer city residents as compared to all residents, so the supply of workers is lower. As a result, the supply curve for city residents is further left as shown in the left-hand graph. Likewise, the labor pool is larger for all residents, so the supply curve for all residents is further right as shown in the right-hand graph.

Step 3

Question

The equilibrium wage would be VTd5VKUscpoVGkH50Jd5CQ== in the market that allows city residents only, and the number of workers would be 1F1hSFA/y6X4GNK6/WY8jQ== than when both groups were combined.

As is typical for markets where supply is reduced, quantity is lower and the price is higher. In this example, city residents are given preference, and they are rewarded with more money.

Step 4

Question

The equilibrium wage would be 1F1hSFA/y6X4GNK6/WY8jQ== in the market that allows all residents, and the number of workers would be VTd5VKUscpoVGkH50Jd5CQ== than when only residents are included.

As is typical for markets where supply is increased, quantity is higher and the price is lower.