Question

1. For each scenario below, describe in words (or use a graph if you’d like) how the demand and/or supply changes for the unskilled labor market (ie - movement, shift, increases, decreases, etc).

(a) Washington introduces a law where customers can no longer pump their own gas (Oregon for example).

(b) There is a shortage of potatoes for fast food restaurants.

(c) Local colleges are offering decreased prices.

Answer 1

a) demand for unskilled labor increases and shifts to the right.

When Washington passes a law where customers can no longer pump their own gas, then gas stations will have to hire workers to pump gas. For which they will increase their demand for unskilled labor.

b) demand for unskilled workers decrease and shifts to the left.

When there is a shortage of potatoes production is lower in restaurant which means less number of workers are demanded to chop potatoes.

c) decrease in supply of unskilled workers and supply curve shifts leftwards.

When local colleges decrease prices, cost of enrolling in college decreases which encourages people to study. This results in decrease in labor supply of unskilled workers.