yego.me
💡 Stop wasting time. Read Youtube instead of watch. Download Chrome Extension

Changes in labor supply | Microeconomics | Khan Academy


3m read
·Nov 11, 2024

In a previous video, we took a look at the labor markets, and we thought about it in the context of the entire market and how it might impact a firm. So let's say that all of a sudden, the nation's immigration policy changes where they're willing to bring in a lot more folks who have the skills necessary to participate in the labor market that we are studying right now.

So, when that immigration opens up and more people immigrate into the country, what is going to happen in this labor market? Pause this video and also think about what is going to be the new equilibrium quantity of labor and our new equilibrium wage, and how might that affect this particular firm?

All right, now let's do this together. So, if all of a sudden you have a lot of immigration, new folks who can participate in this labor market, well, that's going to increase the supply at a given wage. So, if this is the market labor supply curve, let's call that sup one, it's going to shift to the right. At a given wage, you are going to have more labor, so it's going to be like this. This is the market labor supply curve two.

Now, what does that do to the equilibrium wage and the quantity of labor? Well, our new equilibrium wage is going to be lower. Put it right over there. I'll call that W sub two with a little star there, and then we have a higher equilibrium quantity of labor, so Q sub two. I'll put a star right over there.

Now, what happens for this firm? Well, our equilibrium wage in the market has gone down, and we assume that this firm is in a perfectly competitive labor market. So, this firm is just going to pay whatever the market wage is. The marginal factor cost for the firm has now shifted down. It is now this is marginal factor cost one; now, this is marginal factor cost two. It is actually rational for the firm to produce more, so this is sup one, and let's call this quantity of labor sup two.

What are other things that might shift the supply curve for labor to the right? We just talked about immigration into a country. You could also imagine more people that are already in the country being willing or being able to participate in that labor market. For example, in the second half of the 20th century, it became more acceptable for women to participate in the labor force. Something like that, where all of a sudden, you have all of these women entering into the labor force or into the labor market for a given labor market, well, that could also shift the curve to the right.

Now, let's think about the other way. Let's imagine that you have net migration out of a country. What would happen to the market labor supply curve? Well, in that situation, we would shift to the left, like this. At a given wage, there would be fewer people that are willing to work. So this is the market labor supply curve. I will call that sup three.

There are other things that could cause it. Maybe people's preferences change, and in this particular labor market, people aren't willing to work there as much. Maybe social norms change, where it's just not cool to work in that labor market. Perhaps there's another labor market in another industry that, all of a sudden, is paying better. In that situation, fewer people would be willing to work in this labor market.

When you shift to the left, your market wages go up, so W sub three, just like that. The quantity of labor is going to go down, Q sub three. As we see, if we look at how it impacts a particular firm in a perfectly competitive labor market, this would be the marginal factor cost for a firm that's participating in that market. So this is MFC sub three, and now the quantity of labor that this firm would hire is going to go down, so quantity that the firm hires sub three. Put a star over there, and it has gone down.

So, hopefully, what we just went through isn't too much of a surprise for you. As you see, labor markets behave very similarly to the markets for many other things. If more labor enters into a market, well, it's going to shift the supply of labor to the right. If more labor leaves the market or doesn't want to be in that market, it's going to shift the market labor supply curve to the left.

More Articles

View All
The Rise And Fall Of Michael Reeves | My Response
So this is going to be a serious video for two reasons. Number one, it’s my birthday today! I’m 32 years old, and my only birthday wish is that you just hit the like button for the YouTube algorithm. And second, I want to address something that I have av…
Surviving a Firefight | No Man Left Behind
One thing you have to understand about an SCES soldier, you know, during them six months of selection, what we do is knock them soldiers down physically, mentally, everything. And they get back up and they keep moving on, and you just keep getting over ea…
Safari Live - Day 166 | National Geographic
This program features live coverage of an African safari and may include animal kills and carcasses. Viewer discretion is advised. Good afternoon, good afternoon ladies and gentlemen, and a very warm welcome to you again here on Safari Live. We are on a …
Augustus becomes first Emperor of Roman Empire | World History | Khan Academy
We finished the last video in the year 40 BCE, where the year began with the Parthian invasion of Syria and the Eastern provinces of the Roman Republic. And really, is it an Empire, the Roman Republic, or the Roman Empire? But Mark Anthony, who was in co…
Mars Gets Ready for Its Close-up | Podcast | Overheard at National Geographic
I’m getting to go on a guided tour of Mars. This is so freaking cool! You can see this spectacular panoramic landscape. This could be Canyonlands; this could be Death Valley. What’s the weather like in this section of Mars? Yeah, the forecast for tomorro…
Bad Investing Mistakes That Make Me Cringe...
Hey guys, welcome back to the channel! In this video, we’re going to be talking about three specific investing mistakes that, in all honesty, these ones like really make me cringe. Like, not gonna lie! And in all honesty, I see people make these mistakes …