Problem 40 Hard Difficulty

Assume that the supply of low-skilled workers is fairly elastic, but the employers’ demand for such workers is fairly inelastic. If the policy goal is to expand employment for low-skilled workers, is it better to focus on policy tools to shift the supply of unskilled labor or on tools to shift the demand for unskilled labor? What if the policy goal is to raise wages for this group? Explain your answers with supply and demand diagrams.

Answer

When employer's demand for low-skilled worker is inelastic and supply is elastic, then
employment for low-skilled worker can only be expand by using policy tool to shift the demand of
unskilled workers. Since, demand curve is inelastic, employer will not respond to price change.
This means that employer's demand will increase significantly but it does not lead to significant
increase in wages.

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Principles of Microeconomics for AP® Courses

Chapter 5

Elasticity

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Lucifer M.

January 17, 2022

What if the policy goal is to raise wages for this group? Explain your answers with supply and demand diagrams.

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Video Transcript

all right, This is problem for 40 from Chapter five and saying assume that the supply of low skilled workers is fairly elastic. But the employersdemand for such workers is fairly an elastic. If the policy goes to expand employment for low skilled workers, is it better to focus on policy to close to shift the supply of unskilled labor or into us to shift the demand for unskilled labor? What if your policy goal is to raise wages for groups? Explain your answers with supplying demand diagrams? Whoa, I've gone ahead and graft this scenario. It's just a normal supply and demand, with price being wages on and remember for an elastic supply that's going a very small slope. So that's why it's, you know, fairly small slope. And for an inelastic demand, it's gonna very big slogan that so it's a very big slope. So the first Mary they're asking about is, if you want to expand, employment means we want the quantity of employment to go up. Should we shift supplier demands? Well, let's look, if we shift supply, how does it affect quantity? Let's look at this cheese to equilibrium. If we shift supply, it's not affecting quantity very much, right? Because the first equilibrium, the first to deliver him here to here. The quantity hasn't changed all that much. But the price has changed a lot. So maybe 50 supply wouldn't be the best idea. Now what if we shifted? Demand will say demand is shifted again. Let's do to equilibrium. Uh, in this scenario, you can see that the quantity has increased a lot, right from a to B. Where's Pryce has gone from, say, see or rather, C to D. Price hasn't changed very much. Quantity has changed a lot. So if you want to increase employment, you want to have more workers employed. You should definitely shift demand in this case because it's not really affecting prices really affecting quantity. Now, the other scenario, uh, was asking about increasing wages. So if you want to increase wages, what should you do? While we just showed it? You should you should sit. Excuse me? You should shift supply if you shift up supply. You're moving from this equilibrium to this equilibrium. So quantity isn't que greatly affected going from, you know, A to B. But wages going from C to D is a huge increase. So in this scenario, if you want to affect wages, you should definitely focus on

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