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 coal rises. b. New oil-drilling equipment is invented that is cheap and requires few workers to run. c. Several major companies that do not mine coal 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.

When the price of coal rises, oil becomes a more attractive substitute for energy production. This will increase the demand for oil and consequently, the demand for oil workers will go up. With an upward shift in the demand curve, the equilibrium wage and quantity of oil workers will increase. To illustrate this with a demand and supply diagram, consider the following: 1. Draw the initial demand(D1) and supply(S1) curves. 2. Show the initial equilibrium wage (W1) and quantity (Q1) of oil workers. 3. Draw a new demand curve (D2) shifted to the right due to an increase in demand for oil workers (higher price of coal). 4. Identify the new equilibrium wage (W2) and quantity (Q2) of oil workers, both of which should be higher than the initial values.

The introduction of new oil-drilling equipment that is cheap and requires fewer workers to run will increase the productivity of oil workers. This will lead to a decrease in the demand for oil workers as fewer workers will be needed to produce the same amount of oil. Less demand for oil workers means a downward shift in the demand curve, lowering both the equilibrium wage and quantity of oil workers. To illustrate this with a demand and supply diagram: 1. Draw the initial demand(D1) and supply(S1) curves. 2. Show the initial equilibrium wage (W1) and quantity (Q1) of oil workers. 3. Draw a new demand curve (D2) shifted to the left due to the decrease in demand for oil workers (new oil-drilling equipment). 4. Identify the new equilibrium wage (W2) and quantity (Q2) of oil workers, both of which should be lower than the initial values.

When several major companies open factories in Texas, offering well-paid jobs outside the oil industry, oil workers will have more job alternatives. This will lead to an increase in the supply of workers for these alternative jobs and a decrease in the supply of oil workers. With a leftward shift in the supply curve, the equilibrium wage for oil workers will rise, and the quantity of oil workers will go down. To illustrate this with a demand and supply diagram: 1. Draw the initial demand(D1) and supply(S1) curves. 2. Show the initial equilibrium wage (W1) and quantity (Q1) of oil workers. 3. Draw a new supply curve (S2) shifted to the left due to the decrease in supply of oil workers (more job alternatives). 4. Identify the new equilibrium wage (W2) and quantity (Q2) of oil workers, where W2 should be higher and Q2 lower than the initial values.

When the government imposes costly new regulations to make oil-drilling a safer job, operating costs for oil producers will go up. Consequently, businesses will try to cut production costs, which can lead to a decrease in demand for oil workers. Therefore, the demand curve for oil workers will shift to the left, lowering both the equilibrium wage and quantity of oil workers. To illustrate this with a demand and supply diagram: 1. Draw the initial demand(D1) and supply(S1) curves. 2. Show the initial equilibrium wage (W1) and quantity (Q1) of oil workers. 3. Draw a new demand curve (D2) shifted to the left due to a decrease in demand for oil workers (costly new regulations). 4. Identify the new equilibrium wage (W2) and quantity (Q2) of oil workers, both of which should be lower than the initial values.