Principles of Microeconomics / Unit 3 MIC 0209 worked example, 60 to 90 seconds
Which Labor Curve Shifts, and Which Way
The idea
Given an event in a labor market, decide which side it changes and which way, then read wage and employment off the shift. Product demand, training, technology, the number of firms, regulation and other input prices shift labor demand. Population, required education, licensing, benefits and wages elsewhere shift labor supply. Demand right raises wage and employment; demand left lowers both. Supply right lowers the wage and raises employment; supply left raises the wage and lowers employment.
In practice
Worked example, four events for construction workers. More families move to town and want houses: product demand, labor demand right, wage and employment rise. Prefabricated framing lets robots do work once done on site: a substitute technology, demand left, wage and employment fall. A training program makes workers more productive: demand right, both rise. A rival trade raises its pay: some workers leave, supply left, wage rises and employment falls.
Where people slip
The first error is putting a wage change on the wrong axis: a minimum wage is not a shifter, it is a floor across the diagram. The second is treating an increase in the number of workers as more demand for labor because "there are more people to hire". More workers is supply, and it lowers the wage.
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