Question

1. While the relative supply of college graduates has increased substantially in developed countries in the past few decades, the college premium (i.e., the college/high-school wage ratio) has also increased. Which of the following best explains the increases in both supply and price of skills?

1. An increase in the supply of skills raises the demand for skills directly
2. College students learn more from school today than in the past, and hence new generations of college graduates are more productive at work than the old ones.
3. Directed technical change: more skill-complementary technology is invented when the supply of skills is larger, increasing demand for skills subsequently.
4. New technology substitutes skills.

Answer 1

Answer to the question:

Option C: Directed technical change: more skill-complementary technology is invented when the supply of skills is larger, increasing demand for skills subsequently..

Explanation: With the technical advancement, the new technologes demand skilled workers. So, the deamdn for skilled eduction in the colleges is increasing. This is tending the colleges to supply more skilled courses. So, the demand for skilled courses is increasing and thus price also is increasing and the college is supplying more at a higher price.

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answered by: anonymous