March 27, 2017

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6. Show the effect of each of the following events on the market for labor in the computer manufacturing
industry. Use graphs.
a. Congress buys personal computers for all American college students.
Wouldn't the demand curve shift to the right while the supply curve stays the same.

b. More college students major in engineering and computer science.
Wouldn't the demand shift to the right while the supply stays the same.

c. Computer firms build new manufacturing plants.
Wouldn't that shift the supply curve to the right while the demand curve stays the same.
5. Imagine a firm that hires two types of workers – some with computer skills and some without. If technology advances so that computers become more useful to the firm, what happens
to the marginal product of the two types? What happens to equilibrium wages? Explain, using
appropriate diagrams.

Wouldn't one graph of marginal product show a line being downward sloping for those without computer skills and the marginal product of those with computer skills is more like a straight line.

Wouldn't the equilibrium wage of those without computer skills show a demand curve intersecting a supply curve that when that point is compared to the equilibrium wage of those with computer skills shows a point that is higher so a higher equilibrium wage.

6a correct
6b correct
6c correct

5) I don't think you have enough informtion to talk about the relative slopes of the marginal product of workers.

I think you have two markets, one for skilled workers, one for unskilled workers; two graphs, two demand curves, two supply curves.

Increases in technology will increase the marginal product of the skilled workers at all levels. So, the demand for skilled workers goes up. Wages and quantity of skilled workers goes up.

As for unskilled workers, their marginal product curve doesnt change. (Think of a ditch digger. Does a new release of a Microsoft opperating system change the number of ditches he can dig?) As for any change in demand for unskilled workers, you will need to make some assumption about whether they are substitutes for skilled workers, compliments of skilled workers, or neither substitutes or complements.

Thanks for the information.

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