Will Rate high! You are the manager of a firm that plans to expand the Humanreso

Question

Will Rate high! You are the manager of a firm that plans to expand the Humanresources base of its operations by hiring additional businessschool graduates over the next few years. You recently read anarticle in the Wall Stree Journal that reports that enrollments inbusiness schools have declined as students are moving intohard sciences. That same article reports that theshakeup of upper-management is over at Us firms and that the nextdecade there will be a nationwide surge in the demand for MBA's.How will these events affect your firms ability to expand its ownbase of MBA's Will Rate high! You are the manager of a firm that plans to expand the Humanresources base of its operations by hiring additional businessschool graduates over the next few years. You recently read anarticle in the Wall Stree Journal that reports that enrollments inbusiness schools have declined as students are moving intohard sciences. That same article reports that theshakeup of upper-management is over at Us firms and that the nextdecade there will be a nationwide surge in the demand for MBA's.How will these events affect your firms ability to expand its ownbase of MBA's

Explanation / Answer

      This question is bestanswered with simple supply and demand analysis. The firms inthe question are the ones demanding more skilled labor, and theholders of the MBAs are supplying the skilled labor. Thearticle quoted says that fewer people have been going to businessschool, with fewer entering school we expect that fewer MBAs willbe availible in future years. Imagine a simple supply anddemand curve, the decreased enrollment will cause the supply curveto shift to the left. At the same time the article says thatfirms' demand for MBAs will be increasing, again imagine the demandcurve, as demand increase it will shift to the right. Draw asupply and demand curve and then make these shifts. The pricewill go up, but without knowing which shift is greater (demand orsupply) we are unable to say anything about the change inquantity. What this means to you and your firm is that youshould expect to have to pay new MBAs more (either in income orbenefits or both) because the market price for them has goneup.

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