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A part of an economics course material, focusing on the effects of labor productivity, automation, and skills on the demand and supply of unskilled workers in an automobile plant assembly line and the economy as a whole. It includes three exercises that discuss how various factors influence the demand for unskilled workers, the economywide labor supply, and the equilibrium wages for skilled and unskilled workers.
Typology: Assignments
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a. The plant management introduces new assembly-line methods that increase the number of cars unskilled workers can produce per hour.
b. Robots are introduced to do most basic assembly-line tasks.
c. The workers unionize.
a. Social security benefits are made more generous.
b. War preparations lead to the institution of a national draft, and many young people are called up.
a. Suppose that electronic equipment is introduced that increases the marginal product of skilled workers (who can use the equipment to produce more toys per hour worked). The marginal products of unskilled workers are unaffected. Explain, using words and graphs, what happens to the equilibrium wages for the two groups.
b. Suppose that unskilled workers find it worthwhile to acquire skills when the wage differential between skilled and unskilled reaches a certain point. Explain what will happen to the supply of unskilled workers, the supply of skilled workers, and the equilibrium wages for the two groups. In particular, what are equilibrium wages for skilled workers relative to unskilled workers after some unskilled workers acquire training?