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Chapter 12: Problem 5

Suppose that in the market for U.S. meat packers, two things happen simultancously: (1) Due to growth in less-developed countries, the demand for U.S. meat exports rises; and (2) Due to other job opportunities, fewer people find meat-packing an attractive job. a. Which curve or curves in the labor market for meat packers would be affected by these changes? b. If there were no other changes, could you predict the impact of these events on the equilibrium wage of meatpackers? On their equilibrium employment level? Explain.

Short Answer

Expert verified
The changes would affect both demand and supply curves for labour in meat packing industry, shifting the demand curve to the right and supply curve to the left. The equilibrium wage for meat packers would most likely increase due to upward pressures from both increased demand for and decreased supply of labour. The effect on the equilibrium employment level is uncertain without more information.

Step by step solution

01

Identify the affected curves

A rise in demand for U.S meat exports would mean that companies need more meat packers hence increased demand for labour. This would shift the demand curve for labour to the right. On the other hand, fewer people finding meat packing job attractive would lead to a decrease in supply of labour, shifting the supply curve for labour to the left.
02

Predict the impact on equilibrium wage and employment level

With the shift of the both curves (labour demand shifts to the right and labour supply shifts to the left), the impact on equilibrium wage and employment level depends on the shape and elasticity of the curves. However, generally, the equilibrium wage level will most likely rise, because increased demand and decreased supply both put upward pressures on wages. The effect on the equilibrium employment level is uncertain without more information: if the positive impact from increased demand (more employment) outweighs the negative impact from decreased supply (less employment), the overall employment level will rise and vice versa.

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Most popular questions from this chapter

Some advocates of the minimum wage argue that any decrease in the employment of the unskilled will be slight. They assert that an increase in the minimum wage will actually increase the total amount paid to unskilled workers (i.e., wage \(\times\) number of unskilled workers employed). Discuss what assumptions they are making about the wage elasticity of labor demand.

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