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Current time:0:00Total duration:4:51
AP.MICRO:
PRD‑4 (EU)
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PRD‑4.B.2 (EK)

Video transcript

in a previous video we took a look at the labor markets and we thought about it in the context of the entire market and how it might impact a firm so let's say that all of a sudden the National the nation's immigration policy changes where they're willing to bring in a lot more folks who have the skills necessary to participate in the labor market that we are studying right now so when that immigration opens up and more people immigrate into the country what is going to happen in this labor market pause this video and also think about what is going to be the new equilibrium quantity of Labor and our new equilibrium wage and how might that affect this particular firm all right now let's do this together so if all of a sudden you have a lot of immigration new folks who can participate in this labor market well that's going to increase the supply at a given wage so if this is the market labor supply curve let's call that two sub one it's going to shift to the right at a given wage you are going to have more labor so it's going to be like this so this is the market labor supply curve - now what does that do to the equilibrium wage and the quantity of Labor well our new equilibrium wage is going to be lower to put it right over there I'll call that W sub 2 with a little star there and then we have a higher equilibrium quantity of Labor so Q sub 2 I'll put a star right over there now what happens for this firm well our equilibrium wage in the market has gone down and we assume that this firm it is a perfectly competitive wait labor market so this firm is just going to pay whatever the market wage is and so the marginal factor cost for the firm has now shifted down it is now this is marginal factor cost 1 now this is marginal factor cost 2 and now it is actually rational for the firm to produce more so this is sub one and let's call this quantity of labor sub two and so what are other things that might shift the supply curve for labor to the right we just talked about immigration into a country you could also imagine more people that are already in the country being willing or being able to participate in that labor market for example in the second half of the 20th century it became more acceptable for women to participate in the labor force and so something like that where all of a sudden you have all of these women entering into the labor force or into the labor market for given lay for a given market well that could also shift the curve to the right now let's think about the other way let's imagine that you have net migration out of a country what would happen to the market labor supply curve well in that situation we would shift to the left like this at a given wage there would be fewer people that are willing to work so this is the market labor supply curve curve I will call that sub 3 there's other things that could cause it maybe people's preferences change and in this particular labor market people aren't willing to work there as much maybe social norms change where it's just not cool to work in that labor market maybe there's another labor market in another industry that all of a sudden is paying better in that situation fewer people would be willing to work in this labor market and so when you shift to the left your market wages go up so W sub 3 just like that the quantity of Labor is going to go is going to go down Q sub 3 and then as we see if we look at how it impacts a particular firm now perfectly competitive mate labor market this would be the marginal factor cost for a firm that's participating in that market so this is M F C sub 3 and then now the quantity of labor that this firm would hire is going to go down so quantity that the firm ire sub 3 put a star over there and it has gone down so hopefully what we just went through is it too much of a surprise for you as you see labor markets behave very similarly to the markets for many other things if more labor enters into a market what's going to shift the supply of labor to the right and if more labor leaves the market or doesn't want to be in that market it's going to shift the market labor supply curve to the left
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