Reference Article for Homework Questions

Labor Shortage Draws Attention of U.S. Lawmakers:

https://www.wsj.com/articles/labor-shortage-draws-attention-of-u-s-lawmakers-11622712602

Homework Questions

a) Draw and label a graph that depicts a demand curve and a supply curve in the market for labor. Identify the equilibrium wage rate in the graph. Hint: Put labor on the x-axis and wages on the y-axis. Labor demand represents the amount of labor demanded by all firms in the economy; labor supply is the total quantity of labor supplied by all workers. It is ok to draw a graph that depicts a demand curve and a supply curve for the general conditions in the labor market as there is no specific data provided in this article.

b) The article states "Some economists, Republican lawmakers and business owners say enhanced federal unemployment benefits are contributing to the labor shortage, because many workers receive more in government aid than they would get on the job." Use the supply and demand framework to show how a significant increase in unemployment benefits changes the labor market equilibrium. Specifically, (i) would this cause the demand curve for labor to change? If so, in which direction? (ii) would this cause the supply curve for labor to change? If so, in which direction? Briefly explain your answers.

c) Under what circumstances could a labor shortage develop in the framework of point b)?

d) The article states "Surveys suggest other factors are also holding people back from returning to work, such as continuing fear of contracting Covid-19 or lack of childcare." Provide a list of at least 2 benefits and 2 economic costs that affect the decision to work. On the latter, distinguish between explicit and implicit costs (listing at least one in each category).

Please below link for the PDF version of the reference article in above homework question. https://ucla-my.sharepoint.com/:b:/g/personal/sanketnikam_ucla_edu/EXjqWA8HJaZCnz6feZWJ33IBuJK_T5GhGy_Tlhi3Q7QcFg?e=2T5h6C