### Concept: Factors that Shift Market Labor SupplyConsider the labor market illustrated in the figure to the right, where the market equilibrium wage is $ W_1 $ and equilibrium employment is $ L_1 $.Suppose opportunities in other labor markets decrease.**Use the line drawing tool** to show the effect of this change in the labor market by drawing either a new labor supply curve ($ S_2 $) or a new labor demand curve ($ D_2 $).**Carefully follow the instructions above, and only draw the required objects.**---**Instructions to Create Your Graph:**1. **Click the graph:** To initiate the editing process.2. **Choose a tool in the palette:** Select the line drawing tool appropriate for either the labor supply or labor demand curve.3. **Follow the instructions:** Ensure that you provide an accurate depiction of the shift in the graph based on the changes in labor market opportunities.---**Graph Explanation (not provided in the image, for context):**In an economic graph depicting labor markets, the x-axis typically represents the quantity of labor (employment, $ L $), and the y-axis represents the wage rate ($ W $). - **Equilibrium Point:** The initial condition where the labor supply curve ($ S_1 $) intersects the labor demand curve ($ D_1 $) at the equilibrium wage $ W_1 $ and equilibrium employment $ L_1 $.- **Shifts in Curves:** A decrease in opportunities in other labor markets would likely increase the labor supply in the current market, shifting the labor supply curve to the right from $ S_1 $ to $ S_2 $. Conversely, an increase in labor demand from employers would shift the labor demand curve to the right from $ D_1 $ to $ D_2 $.By manipulating these curves using the line drawing tool, one can visualize the dynamic changes in wage and employment resulting from different economic scenarios. On an educational website, here is an explanation and transcription of the provided image, which is a supply and demand graph for the labor market:---### Understanding Wage and Employment Equilibrium in the Labor Market#### Graph Explanation:The graph presented illustrates the labor market equilibrium, determining the relationship between wage rates and the quantity of labor (employment). It is a visual representation commonly used in economics to explain how the labor market functions.**Axes:**- The vertical axis represents the wage rate, measured in dollars per hour.- The horizontal axis represents the quantity of labor (employment).**Curves:**- The **Supply Curve of labor (S\_1)** is an upward-sloping line (typically colored in red). It indicates that as wages increase, the quantity of labor supplied also increases.- The **Demand Curve for labor (D\_1)** is a downward-sloping line (typically colored in blue). This demonstrates that as wages decrease, the quantity of labor demanded increases.**Equilibrium Point:**- The equilibrium point is where the supply curve and demand curve intersect. This intersection determines the equilibrium wage rate (W\_1) and the equilibrium quantity of labor (L\_1).#### Key Points to Understand:1. **Wage Rate (W\_1):** - This is the wage (in dollars per hour) at which the quantity of labor supplied equals the quantity of labor demanded. - At this wage rate, both employers and employees are satisfied: employers can hire the amount of labor they need and employees find the available jobs sufficient at the given wage. 2. **Quantity of Labor (L\_1):** - This represents the number of labor hours or the level of employment in the market at the equilibrium wage rate.#### Practical Implications:- If the wage rate is higher than the equilibrium wage (W1): This leads to a surplus of labor (unemployment) because more people are willing to work at higher wages, but employers are not willing to hire as many workers at that increased cost. - If the wage rate is lower than the equilibrium wage (W1): This results in a shortage of labor (jobs going unfilled) because employers want to hire more workers at the lower wage rate, but fewer workers are willing to work for such low wages.Understanding this graph is crucial for analyzing how changes in the market, such as shifts in the supply or demand curves, can affect employment

When the external labor market opportunities decreases then the opportunity of labor supply in the…

Consider the labor market illustrated in the figure to the right, where the market equilibrium wage is W, and equilibrium employment is L1. Suppose opportunities in other labor markets decrease. Use the line drawing tool to show the effect of this change in the labor market by drawing either a new labor supply curve (S2) or a new labor demand curve (D,).

Consider the labor market illustrated in the figure to the right, where the market equilibrium wage is W, and equilibrium employment is L1. Suppose opportunities in other labor markets decrease. Use the line drawing tool to show the effect of this change in the labor market by drawing either a new labor supply curve (S2) or a new labor demand curve (D,).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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