1. Draw market demand and supply curves for physicians and physician assistants

Question

1. Draw market demand and supply curves for physicians and physician assistants indicating a market clearing price (wage) for each. Label each graph. Consider the effect on each labor market when the following happens: hospitals decide to substitute physician assistants for physicians, ceteris paribus.

• What happens to the market wage for each type of labor as a result of the substitution? What happens to the market-clearing quantity of each type of labor? Answer should be in one very brief paragraph

Explanation / Answer

If hospitals decide to substitute physician assistants for physicians, then the demand for assistants will increase while the demand for physicians will decrease. This implies that the wage and quantity of assistants will increase while the wage and quantity of physicians will decrease.

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