Appl Ex 4c

Application Exercise 4c: Labour markets exercise using demand and supply diagrams.



It increases the willingness of students to undertake a teaching course, which boosts the supply of teachers creating downward pressure on the teaching wage (and greater employment of teachers)



It reduces the willingness of people to supply their labour to teaching services, which reduces the supply of teachers creating upward pressure on the price and reduced employment of teachers (e.g. bigger class sizes)



This reduces the supply of doctors in the market creating upward pressure on doctors wages and reduced employment of doctors (e.g. shortages of doctors in remote regions will remain)



This increases the demand for nurses by medical facilities which creates upward pressure on wages and greater employment of nurses



More people entering university is likely to mean that fewer people will be entering trades such as plumbing. This ultimately reduces the supply of plumbers, exert upward pressure on the wage of plumbers and reduce the number of plumbers employed.



The 1st home owners grant will make it easier for people to buy their 1st home, which increases the demand for houses and results in more houses being built.  This increases the demand for builders, exerting upward pressure on the wages of builders and more builders being employed.



This will increase the demand for footballers to play in the AFL and, combined with the removal of the salary cap, causes the wages of AFL footballers to rise and more footballers will be employed (note the removal of limitations on player lists)



Shorter ski seasons necessarily reduces the demand for ski instructors which decreases both employment and wages of ski instructors



An increase in the minimum wage effectively creates an excess supply of labour (because the new minimum wage will be above the equilibrium wage rate) which results in higher wages and lower employment (as businesses reduce their demand for labour – a contraction along the demand curve)



This will ultimately increase the demand for workers because employers will be encouraged by the fact that removing unproductive employees is less onerous.  This increases the wage and creates more jobs.



A super government department will also increase the demand for all types of workers, including clerical workers, which will result in a higher wage and greater employment of clerical workers.


A and D

Higher personal tax rates will create a disincentive for people to work, which reduces the supply of workers, decreasing employment and raising the wage (diagram A).  However, higher personal tax rates will work to reduce disposable income, which decreases the demand for goods and services and production across the economy and necessarily leads to a reduction in the demand for labour, wages and employment (diagram C). [However, this ignores any analysis of how the additional government revenue is spent in the economy.]



This is the opposite of number 9 above.  The introduction of a maximum wage creates an excess demand because the new wage will be below the equilibrium.  It results in lower wages and lower employment given that fewer executives will be willing to become a CEO at the new lower wage rate.



This will ultimately reduce the demand for the real estate services which then reduces the demand for real estate agents, resulting in lower wages and lower employment of real estate agents.



The reduction in stamp duty will make it more attractive for people to buy and sell homes which then increases the demand for real estate services, pushing up the demand for real estate agents, resulting in higher wages and higher employment of real estate agents


B and D

Greater immigration will have both demand and supply effects.  It will increase the supply of workers in labour markets which exerts downward pressure on wages and results in more employment (diagram B).  In addition, it results in an increased demand for and production of goods and services which then leads to an increased demand for labour, upward pressure on the wage and greater employment (diagram D).



This makes it much less attractive to become a football umpire which reduces the willingness of people to train and become umpires in various football leagues.  This resulted in a decrease supply of umpiring labour which exerts upward pressure on wages and lower employment.



With more soccer matches being played there will be a greater need for soccer referees, increasing the demand for soccer referees which exerts upward pressure on wages and employment.



This effectively reduces the costs of psychological services for patients, which increases the demand for these services, resulting in an increased demand for psychologists higher wages and greater employment.



With more companies using cheaper offshore labour the demand for local telephonists will necessarily fall, resulting in both lower wages and employment of telephonists.