Answer to Question #130279 in Microeconomics for Saad

Question

Why are the wage rates different for the universty teacher and supporting staff? Draw the demand curves for both kind of labour bearing in mind the elasticity concept and mention the reason for difference in both kind of demand curves

Answer 1

The wage rates of a university teacher and a support staff are different because they have different elasticity of service demanded.

The demand curves below shows the difference between the two types of labor.

The first graph from the left shows the relationship between the wage rate and low skill labor(supporting staff). In this graph there is a shift of the demand curve from $D_2$ to $D_1$this is because if if the workforce is not well-trained or educated then the employers will not hire from this pool of labor since they will not spend significant time and resources to train this workforce, demand for such will shift to the left as shown due to the ability to substitute capital labor which makes the wage elastic.As depicted in the graph the wage will also reduce from $W_2 to W_1$ and the quantity from $Q_2 to Q_1$.

Graph two, on the right shows a shift of the demand curve for labor to the right i.e from.$D_1 to D_2$ while the wage also increases from $W_1 to W_2$ respectively increasing the quantity of labor demanded from $Q_1 to Q_2$

This happens because, a well trained and educated workforce causes an increase in the demand for labor by employers since it's inelastic and wages go up since there is a high marginal revenue of product.

The above explanation gives the reason for the different graphs.