Answer to Question #111777 in Microeconomics for Jeff

Question

A government decides to increase the number of schools it operates leading to an increase in the demand for trachers. At the same time, the government decides to increase the qualification that a person needs to have to become a teacher using a demand and supply diagram analyse the effect of these two decisions on the equilibrim wage rate and the equilibrium quatity of teachers

Answer 1

When the government increases the number of schools it operates, it leads to an increase in demand for teachers. However, the government goes ahead and raises the qualifications that one needs to become a teacher. An increase in required skills for teaching reduces the supply of labor (QS) because few people will be willing to take up the teaching course. Yet, at the same time, the demand (QD) for teachers is high. As a result, the equilibrium wage rate decreases.