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.
Yes, you are correct. With the increase in technology, the marginal product of the skilled workers will increase, resulting in an increase in demand for skilled workers and an increase in wages and quantity of skilled workers. As for the unskilled workers, their marginal product curve will not change, so the demand for them will depend on whether they are substitutes or complements for the skilled workers.
You're welcome! I'm glad I could help clarify some of the concepts for you. Let me summarize and expand on the effects of the events on the market for labor in the computer manufacturing industry using graphs.
a. Congress buys personal computers for all American college students:
In this case, the demand curve for labor in the computer manufacturing industry would shift to the right. This is because the increased demand for personal computers would lead to increased production, which in turn would require more workers. The supply curve, representing the quantity of labor available, would likely remain unchanged in the short run. This would result in an increase in both the equilibrium wage and the quantity of labor hired in the industry.
b. More college students major in engineering and computer science:
This event would also cause the demand curve for labor in the computer manufacturing industry to shift to the right. The increased number of college students majoring in engineering and computer science indicates a higher demand for skilled workers in the industry. Similarly to the previous scenario, the supply curve would remain unchanged, leading to an increase in both the equilibrium wage and the quantity of labor hired in the industry.
c. Computer firms build new manufacturing plants:
In this case, the supply curve for labor would shift to the right. The expansion of the industry's capacity through new manufacturing plants would require more workers to operate them. On the other hand, the demand curve would typically remain unchanged since the event does not directly affect the demand for computer products. This would result in a decrease in the equilibrium wage, but an increase in the quantity of labor hired in the industry.
Now, let's move on to the question about the firm that hires two types of workers - those with computer skills and those without. With technological advancements that make computers more useful to the firm, the marginal product of the two types of workers would likely be affected differently.
For workers without computer skills, the marginal product curve would most likely be downward sloping. As you mentioned, a new release of a Microsoft operating system would not significantly change the productivity or output of unskilled workers, such as a ditch digger. Hence, the marginal product of these workers would remain relatively constant.
For workers with computer skills, the marginal product curve would likely be relatively flat or close to a straight line. As technology advances and computers become more useful to the firm, workers with computer skills would be able to utilize those technological advancements, which could translate into higher productivity and output. Consequently, their marginal product would be less affected by incremental increases in computer usage.
Regarding equilibrium wages, assuming there are separate markets for skilled and unskilled workers, the wages would be determined by the intersection of the respective demand and supply curves. With the increase in the marginal product of workers with computer skills, the demand curve for skilled workers would shift to the right. This would lead to an increase in the equilibrium wage and the quantity of skilled workers hired.
As for unskilled workers, the demand and supply equilibrium would depend on the specific relationship between skilled and unskilled labor. If unskilled workers are substitutes for skilled workers, the increase in the demand for skilled labor could lead to a decrease in the demand for unskilled workers, resulting in a decrease in their equilibrium wage. However, if unskilled workers are complements to skilled workers, the increase in the demand for skilled labor could lead to an increase in the demand for unskilled workers, potentially increasing their equilibrium wage.
I hope this explanation helps clarify the effects of these events on the market for labor and the impacts of technological advancements on wages and marginal product.
You're welcome! Just to clarify the answer for question 5:
When technology advances and computers become more useful to the firm, the marginal product of workers with computer skills will increase, while the marginal product of workers without computer skills will remain the same. This means that the demand for skilled workers will increase, leading to an increase in their wages and quantity of skilled workers hired.
On the other hand, the marginal product of workers without computer skills will not be affected by the technological advancement. The demand for unskilled workers will depend on whether they are substitutes for skilled workers, complements to skilled workers, or neither.
Therefore, you would need separate graphs for the markets of skilled workers and unskilled workers, with separate demand and supply curves. The equilibrium wage for skilled workers would increase due to the increase in demand, while the equilibrium wage for unskilled workers would depend on the relationship between the demand for their labor and the demand for skilled labor.
I hope this clarifies everything for you. Let me know if you have any more questions!