4. Links between factor markets Consider the markets for factors of production,

Question

4. Links between factor markets Consider the markets for factors of production, such as labor and land, to produce wheat in Kansas in 1935. During this time period-known as Dust Bowl-major dust storms caused residents of Kansas to migrate west to such states as California and Washington. It also made the land Kansas much less useful for producing wheat. Using the example of the Dust Bowl, show the effects of these two changes on the market for labor in Kansas on the following graph Market for Labor Supp Demand and

Explanation / Answer

In the first case you need to shift the demand curve for labour as well as the supply curve of labour towards left. On one hand there is a reduction in the number of workers because they have been migrated to other places. On the other there will be reduced demand for workers because Areas where dust bowl is taking place will have reduced production.

This implies that the quantity of workers at the equilibrium will fall in Kansas City.

In second diagram you need to shift the demand curve to the left because reduced Productivity of land and the shifting of labour outside Kansas City would reduce the demand for land.

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