In the text we argued that temporary factor-price differentials tend to be eroded by factor mobility. This
Question:
a. Draw diagrams showing the supply and demand for labour in each market.
b. Now suppose there is a sharp increase in the demand for steel pipe. Explain what happens in the market for steel-pipe workers.
c. If the employment of steel-pipe workers increased in part (b), explain where the extra workers came from.
d. What effect does the event in part (b) have on the market for sheet-iron workers?
e. What is the long-run effect of the shock on the relative wages in the two types of jobs?
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Related Book For
Microeconomics
ISBN: 978-0321866349
14th canadian Edition
Authors: Christopher T.S. Ragan, Richard G Lipsey
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