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Markets for the Factors of Production

Shifts in Labor Supply



Shifts in Labor Supply

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Alright, so now let's consider some of the factors that could shift the supply of labor. Alright. We saw shifts in the demand. Now, let's see shifts in the supply. So the first one that can shift supply is the size of the population. Okay, so you can imagine if there's more people in the population, there's gonna be more supply of labor, right? So it's gonna have a direct effect there if the population increases labor supply shifts to the right red labor supply shifts to the right, right. And this can be from a few different places, right? Immigration into your country, more people in the country, or if the births exceed the deaths, right? That's usually the case where we see there's more people being born and dying. So there's generally an increase in that labor over time. Okay, And obviously the opposite. If the population decreases, well, we're gonna have a shift to the left, there's just less people working. Okay, let's go on to this next one here. Demographics. So, the demographics of the labor force also affect the labor supply. So the more people that are what we call a working age, which is usually, you know, between, let's say 18 and 65 here in the us, um the greater the supply of labor, right? The more people that are in that age range, then there's gonna be more people working. So this happened a great example was in the 1970s and 1980s, that's when the baby boomers, that generation finally hit the working age and we saw a huge increase in the supply of labor. another example here, which doesn't really have to do with the working age, but it has to do with demographics of the workforce is women in the workforce. When you think of back at the turn of the 20th century, the early 19 hundreds, most women were house makers, there were big families, so they usually needed the wife to stay home, take care of the kids, take care of the house. And there was usually enough money being made by just the husband, just the mail going to work and being able to provide for the family as we see over time, Right? We're seeing more and more women in the workforce. We're seeing that every day it's increasing. Um and that's been happening since about the sixties and seventies. We've been seeing more and more women in the workforce. Alright, So the demographics that's also going to affect the supply of labor and the last one here, the availability of alternative opportunities. So, let's think about that. This is opportunities in other labor markets. All right. So, now, let's think about a specific labor market, let's say you are a pizza chef, right? But you could also take your skills to go become a pastry chef or something. I know that pastry chefs, it's a little more delicate, but let's just say there are substitutes, right? You can make pizzas or you can go make pastries. So you can imagine if the wage increases in a similar market. so you're over there making pizzas and now you hear that the wage for pastry chefs has gone way up. Well the supply of labor in the first market is going to decrease, right? So the supply of labor in the pizza market is going to decrease when the wage goes up in the pastry market. Right? Does that make sense? That's because people are going to leave the pizza market to go work as pastry chefs instead to make more money and the opposite if the wage decreases, so now they're paying less for pastry chefs, those pastry chefs are going to come over to the pizza industry and start making pizza. So we'll see an increase in the first market, right? So you gotta think about the other market, what's happening there and how that affects our market. Okay, so I got an example there. Well I like my example now better maybe the pizza and the pastry chefs but apple pickers and orange pickers, right? That's that's a good example. If the price, if the wage paid to apple pickers goes way up, you can imagine that orange pickers probably have a lot of the same skill set needed to pick apples. Well they're gonna stop picking oranges and go take the higher wage picking apples. Alright, so let's go ahead and do some practice problems related to this and then we'll move on to the next topic

A low birthrate in Japan led to a general increase in the age of the population in the country. During the 1990s, this led to a decrease in the number of working age people in Japan. What would we expect to occur in the labor market?


The wages paid to pastry and sous chefs are $15 and $25, respectively. If pastry and sous chefs are alternative opportunities and the sous chef wage increased to $30, what would occur in the labor market for pastry chefs?