There is evidence that, other things equal, a 10 percent increase in the number

Question

There is evidence that, other things equal, a 10 percent increase in the number of workers having a particular skill level leads to about a 4 percent decline in wages for workers with that skill level. In addition, this 10-to-4 ratio appears to hold true whether the increase in labor supply is caused by domestic changes in labor supply or by an influx of foreign immigrants Instructions: Round your answers to 2 decimal places. a. Suppose that 42,000 computer programmers work in Silicon Valley. If the number of computer programmers in Silicon Valley increases by 6,300 because of a change in U.S. immigration laws, by how many percentage points would you expect the wage of computer programmers to fall in Silicon Valley? Answer is complete but not entirely correct. 1.20 percent b. Suppose that 8,000 full-time cooks work in restaurants in the Denver area. If Denver becomes popular both with U.S. citizens and with foreigners such that 800 full-time cooks move to Denver from other parts of the United States while 560 full-time cooks move to Denver from other countries, by how much would you expect the wages of full-time cooks to fall in Denver? Answer is complete but not entirely correct. 2.40percent

Explanation / Answer

a)percent increase in the number of workers =(6300/42,000)*100

=15 percent

Now a 10 percent increase in the number of worker causes 4 percent decline in wages

1 percent increase in workers causes 4/10 percent decline in wages

15 percent increase in workers causes (4/10)*15 percent decline in wages

that is 6 percent decline in wages

b)Increase in the number of workers is=1360

percentage change in the number of workers is (1360/8000)*100=17 percent

wages will decline by .4*17=6.8 percentage

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