Scenario: Truck drivers across the country are on strike in an effort to negotiate higher wages. Currently the labor market in this industry clears at WM and QM, as shown in the figure below.

-Refer to the scenario above.Assume that the negotiations were successful and a minimum wage has been implemented.Shortly thereafter,new technology that allows trucks to drive without drivers becomes available.How is the equilibrium in the driver market likely going to change?

Question

Scenario: Truck drivers across the country are on strike in an effort to negotiate higher wages. Currently the labor market in this industry clears at WM and QM, as shown in the figure below.
 
-Refer to the scenario above.Assume that the negotiations were successful and a minimum wage has been implemented.Shortly thereafter,new technology that allows trucks to drive without drivers becomes available.How is the equilibrium in the driver market likely going to change?

Quizplus · Accepted Answer

The introduction of technology that allows trucks to drive without drivers will decrease the demand for drivers, leading to a surplus of drivers at the current wage rate. The equilibrium wage rate will be above the market-clearing level (WM), the quantity of drivers supplied will be above the market-clearing quantity (QM), and the demand for drivers will be below the market-clearing quantity (QM) due to the reduced need for human drivers.

Scenario: Truck Drivers Across the Country Are on Strike in an Effort