| Consider an increase in the supply of labor due to immigration, and use the long-run model. Figure 5-8 shows the box diagram and the leftward shift of the origin for the shoe industry. Redraw this diagram, but instead, shift to the right the origin for computers. That is, expand the labor axis by the amount ?L, but shift it to the right rather than to the left. With the new diagram, show how the amount of labor and capital in shoes and computers is determined, without any change in factor prices. Carefully explain what has happened to the amount of labor and capital used in each industry and to the output of each industry. |
