Chapter 1. Chapter 12

Step 1

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

Question

Consider the following graph, which depicts the supply of and demand for human capital. The x-axis shows the level of investment in human capital (IHC) and the y-axis shows the rate of return (RoR) on human capital.

The graph shows demand and supply curves. The horizontal axis is labeled IHC, or investment in human capital, and the vertical axis is labeled RoR, or the rate of return. The supply curve is an upward sloping line, while the demand curve slopes downwards. They intersect approximately in the middle.

Suppose the U.S. Congress approves increased funding for community colleges. In this case, the IPtEyJ34mx9zAEY2WOxbhUki4OM= of human capital will yfZHE2maK7ZU/ihebUuv20TPoicQGQ9r.

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More graduates should mean more human capital supplied.

Step 2

Question

As a result, the level of investment in human capital will VTqmMoW0WTRNlnz/2dUxL8rg62y4xkLoUX6Wo38CejC7U4vGJ3hsjw==.

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If supply shifts right, all else equal, equilibrium quantity (Q) increases.

Step 3

Question

Now suppose that U.S. manufacturing becomes more heavily dependent on computers, which will require trained workers to operate computers. In this case, the Glw+rSDuFZhvxn7epPgdMM0oWlU= for human capital will yfZHE2maK7ZU/ihebUuv20TPoicQGQ9r.

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Here, firms will need to hire more skilled labor to complement their machines. Demand should increase.

Step 4

Question

As a result, the level of investment in human capital will VTqmMoW0WTRNlnz/2dUxL8rg62y4xkLoUX6Wo38CejC7U4vGJ3hsjw==.

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If demand shifts right, all else equal, equilibrium Q increases.