Answer to Question #130282 in Microeconomics for Umair

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 differences in wages between a university teacher and a supporting staff can arise because of demand and labor supply differences for the specific profession. These are brought about by various reasons such as job attractiveness and differences in amounts of level of education or training required for the different occupations. Laborers who have exceptional skills tend to have a high demand and hence earn higher wages than those who lack such skills. Also, the laborers with more training and education tend to get more wages since they increase the productivity of labor.

The demand curves for both kinds of labor are depicted below:

As shown above, the difference in the demand curves are explained below:

-         The demand curve for University teachers is inelastic; that is, changes in wage rates leads to a smaller percentage change in demand. A rise in wages causes only a small fall in employment.

-         The demand curve for Supporting staff is elastic, that is the employment is sensitive to wage changes. A rise in wages causes a big fall in employment.