Assume the labor demand for unskilled workers in a city in Texas is given by Ld

Question

Assume the labor demand for unskilled workers in a city in Texas is given by Ld = 80 2. The labor supply curve of natives (i.e., non-immigrants) is given by LS = 20 + 8, where is the hourly wage. a. Calculate the equilibrium level of employment and wage rate if there are no immigrants. b. Suppose the arrival of Mexican immigrants shifts out the labor supply curve to Ls = 5+ 8. Calculate the new equilibrium level of employment and wage rate. c. What has happened to the employment level of natives as a result of the immigrant arrival? What has happened to the unemployment rate of unskilled native workers?

Explanation / Answer

a) LD =LS

80-2w = -20+8w

10w = 100

w = 10

LD = 80-2*10= 60

so equulbruim level of employment = 60 and wage equal to $10.

b) LD =LS

80-2w = -5+8w

10w = 85

w = $8.5

and LD = 80- 2*8.5 = 63

c) The wage rate decreases to $8.5

at these wage rate, native labor supply equal to = -20 + 8*8.5 =48

the employment level of natives decreases to 48 from 63 after immigrant.

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