QUESTION 1 (25 MARKS)

On separate Edd-Ess diagrams, show what will happen to the equilibrium wage and equilibrium employment in the labour market when the following occur:

a) The introduction of new, inexpensive capital equipment designed to replace workers. (5m)

b) The nation experienced a 5% increase in immigration and a 9% increase in emigration. (5m)

c) The nation experienced a 9% increase in immigration and a 5% increase in emigration. (5m)

d) The nation enjoys an economic boom when sales of goods and services are increasing. (5m)

e) Malaysian government implements an open-door policy to foreigners in order to stay and work in Malaysia. (5m)

QUESTION 3 (25 MARKS)

a) Decide if the following statements are TRUE or FALSE: Justify "WHY".

i. Since migration decisions are made based on the lifetime earning of the whole family, a family will only migrate if migration increases the lifetime earnings of both working spouses. (0.5m)

ii. Since migration decisions are made under complete information, all migrants earn higher lifetime earnings after migration because they will definitely receive all the benefits they expected. (0.5m)

iii. When both immigrants and natives are less-skilled, they tend to compete for the same type of job. The consequences will be lower wage rates but higher employment level among the natives. (0.5m)

iv. As the productivity of native workers always exceed the productivity of immigrants, the earnings of immigrants will never overtake the earnings of native workers. (0.5m)

Answer all the questions and show all the steps. Question 3 , justify your answer "WHY"