ECO 205 Week 5 DQ 1 - 7518

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    Since September 11th the equilibrium wage has shifted.  Now the jobs of security personnel, police, air marshals, airport security and other related careers are in higher demand therefore the value of the marginal product, in this case security services, has increased.  The increase in the value of the product is the factor which has driven up the wage. Additionally, the labor supply and demand have also shifted.  I believe that immediately after September 11th, there was a shortage of workers in these careers.  For a short while, the labor supply struggled to meet the demand, with new workers entering the market that needed to undergo training and time to be able to perform the necessary duties.  Eventually, the supply caught up with the demand and wages came back into balance.  
    The reason these shifts occur is that in competitive labor markets, wages are determined by the necessary balance of supply, demand and the value of the product.  The wage will adjust to balance the supply and demand for labor.  The wage will also equal the value of the marginal product and labor.  As a rule, any event, like September 11th, that alters the supply or demand for labor also change the equilibrium wage and the value of the marginal product by the same amount because these must always be equal.

Solution Description

 

    Since September 11th the equilibrium wage has shifted.  Now the jobs of security personnel, police, air marshals, airport security and other related careers are in higher demand therefore the value of the ma