Changes in labor supply | Microeconomics | Khan Academy | Summary and Q&A

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April 15, 2019
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Changes in labor supply | Microeconomics | Khan Academy

TL;DR

Increased immigration leads to an increase in labor supply, resulting in a lower equilibrium wage and a higher equilibrium quantity of labor.

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Questions & Answers

Q: How does increased immigration impact labor markets?

Increased immigration leads to a higher supply of labor, causing the labor supply curve to shift to the right. This results in a lower equilibrium wage and a higher equilibrium quantity of labor.

Q: What happens to firms in a labor market with increased immigration?

In a perfectly competitive labor market, firms will adjust to the lower equilibrium wage and produce more. The firms will pay whatever the market wage is, resulting in a decrease in their marginal factor cost and an increase in labor hired.

Q: Can factors other than immigration affect the labor supply curve?

Yes, factors such as changing social norms, preferences, or opportunities in other industries can also shift the labor supply curve. These factors can either increase or decrease the labor supply, leading to changes in the equilibrium wage and quantity of labor.

Q: How does net migration out of a country affect labor markets?

Net migration out of a country leads to a decrease in labor supply, causing the labor supply curve to shift to the left. This results in a higher equilibrium wage and a lower equilibrium quantity of labor.

Summary & Key Takeaways

  • Immigration into a country increases the supply of labor, causing the labor supply curve to shift to the right.

  • The new equilibrium wage in the market is lower, while the equilibrium quantity of labor is higher.

  • In a perfectly competitive labor market, firms will adjust their production levels based on the new equilibrium wage.

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