Chapter 12

 

In this problem we consider the migration of labor from one country to another. To begin with, draw a graph that looks like Figure 2 in the Appleyard and Field text. The total length of the horizontal axis represents the total amount of labor in these two countries. The wage in country I is measured on the left-hand vertical axis, and the wage in country II is measured on the right-hand vertical axis.Click here
1.




Graph the following curves by clicking here
a.

Draw country I's demand curve for labor. Label it DI.
b.

Draw country II's demand curve for labor. Label it DII.
c. Label the wage at which the two demand curves cross as "W*."
d.
Suppose the wage in country I is higher than "W*." Label this wage on the left-hand vertical axis as "WI."
e. Assuming there are no labor market imperfections in country I, how much labor is employed in that country? On the horizontal axis, label this quantity "L2."
f. How much labor is available in country II? If there were no labor market imperfections, what would the wage be there? Label this wage "WII."

g.

Suppose now that country II has a minimum wage that is above "WII," but below "W*." Label this wage "W**." How much labor in country II is employed at this minimum wage? On the horizontal axis, label this quantity as "L1."
h. How many workers are unemployed?

i. If labor is free to migrate, what do you expect to happen to wages in each country?

View graphing answers to question 1 by clicking
  View text answers to question 1 by clicking




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