Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 11

Because input prices are explained by the forces of supply and demand, it is important to understand how various factors may shift these curves. For each of the following factors that may affect market equilibrium in a specific labor market, describe which curve will be shifted and how this shift will affect wage rates:
• An increase in the price of the output that workers produce
• An increase in the costs of inputs that substitute for labor
• An increase in wages being offered in some other market
• A large influx of new workers into the market
• Regulations requiring that firms provide health insurance for their workers (explain why this may shift both curves)• Institution of a tax on wages