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8. Links between factor markets The following scenario examines markets for factors of production, which include land and labor, used to produce oranges in California
8. Links between factor markets The following scenario examines markets for factors of production, which include land and labor, used to produce oranges in California in 1935. During this time period-known as the Dust Bowl-major dust storms caused residents of Kansas to migrate west to such states as California and Washington. Using the example of the Dust Bowl, illustrate the effects of this influx of migrants on the market for labor in California on the following graph. Assume the marginal product of workers in California remains the same in spite of the migrant workers. (?) Market for Labor Supply Demand Supply WAGE Demand LABOR From the graph, you can deduce that the migration of workers leads the equilibrium wage rate in California to Now consider the effect this change in the labor market has on the land market. In particular, think about the effect of the wage change you just found on the market for agricultural land in California. Assuming that labor and land are used together in the production of oranges, illustrate this effect on the land market in California on the following graph. (? Market for Land O Supply Demand Supply RENTAL PRICE Demand LAND Grade It Now Save & Continue Continue without saving
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