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Chapter 4: Q15 (page 104)

Name some factors that can cause a shift in the

demand curve in labor markets.

Short Answer

Expert verified

Change in demand of goods to be produced by labor, Change in production process : can cause a shift in labor demand curve.

Step by step solution

01

Labor Demand - Basic Concept 

Labor Market demand is done by firms. it is called Derived Demand, based on demand of the good produced by respective labor.

Primary factor effecting quantity of labor demanded is its price ie wages & salaries. Quantity of labor demanded is inversely related to wage / salary level, so the curve is downward sloping.

02

Shift Detailed Explanation

Change in wages or salaries causes increase (expansion) or decrease (contraction) in 'quantity demanded' of labor, which leads to movement along the labor demand curve.

Change in any factor other than wages or salaries causes increase or decrease in 'demand' of labor, which lead to shift of the labor demand curve.

a. These factors other than wages can be

  • Change in demand of goods produced by the labor : More demand of goods imply more demand of labor and shift the curve rightwards, & vice versa.
  • Change in process or technique of production : Labor saving technique imply decrease in demand of labor and shift supply curve leftwards, & vice versa.

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Most popular questions from this chapter

Why are the factors that shift the demand for a product different from the factors that shift the demand for labor? Why are the factors that shift the supply of a product different from those that shift the supply of labor?

What is the “price” commonly called in the labor

market?

If the government imposed a federal interest rate ceiling of 20% on all loans, who would gain and who would lose?

Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers.

a. The number of people at the most common ages for home-buying increases.

b. People gain confidence that the economy is growing and that their jobs are secure.

c. Banks that have made home loans find that a larger number of people than they expected are not repaying those loans.

d. Because of a threat of a war, people become uncertain about their economic future.

e. The overall level of saving in the economy diminishes.

f. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.

Predict how each of the following events will raise or lower the equilibrium wage and quantity of oil workers in Texas. In each case, sketch a demand and supply diagram to illustrate your answer.

a. The price of oil rises.

b. New oil-drilling equipment is invented that is cheap and requires few workers to run.

c. Several major companies that do not drill oil open factories in Texas, offering many well-paid jobs outside the oil industry.

d. Government imposes costly new regulations to make oil-drilling a safer job.
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