7. Shifts in labor supply Assume that the information technology and consulting

Question

7. Shifts in labor supply

Assume that the information technology and consulting industries employ people with similar skills. Suppose an increase in the demand for consultants leads to a rise in their wages, while the demand for computer analysts remains the same.

The following graph shows the labor market for computer analysts in the United States.

Show the effect of the rise in demand for consultants on the U.S. labor market for computer analysts by shifting the labor demand curve, the labor supply curve, or both.

Explanation / Answer

The effect of the rise in demand for consultants on the U.S. labor market for computer analysts is that labor supply curve for computer analysts will shift rightwards i.e., the supply will increase. There would be no effect on the demand for computer analysts i.e., demand will not change.

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