Question

1. Explain how a surge in baby boomers retiring affects the labor supply and demand graph and its connection to the aggregate production function.
2. State if it increases or decreases each of the following:
   1. equilibrium wage ______________
   2. number of workers ____________
   3. total output ________________
   4. productivity (output per worker)________________
   5. standard of living _______________

Answer 1

When baby boomers start retiring this indicates that total employment is decreasing and this also decreases the size of labour force. The supply curve shifts to the left in the labour market

A) equilibrium wage increases because of a leftward shift of supply curve

B) number of workers will decrease because employment is reduced

C) total output decreases because production is reduced due to reduced labour force

D) output per worker may increase or decrease because the number of workers as well as production both are reduced

E) standard of living is measured by output per capita. Sales output is reduced and population is same standards of living will be worsen