Wages and Employment in Perfect Competition

4. Labor Markets at Work

4.2. Answers to Try It! Problems

  1. An increase in the demand for new housing would shift the demand curve for construction workers to the right, as shown in Figure 12.8 "Changes in the Demand for and Supply of Labor", Panel (a). Both the wage rate and the employment in construction rise.
  2. A larger number of women wanting to work in construction means an increase in labor supply, as shown in Figure 12.8 "Changes in the Demand for and Supply of Labor", Panel (c). An increase in the supply of labor reduces the wage rate and increases employment.
  3. Improved training would increase the marginal revenue product of construction workers and hence increase demand for them. Wages and employment would rise, as shown in Figure 12.8 "Changes in the Demand for and Supply of Labor", Panel (a).
  4. The robots are likely to serve as a substitute for labor. That will reduce demand, wages, and employment of construction workers, as shown in Panel (b).