Answer to Question #98950 in Microeconomics for annie

Question

One of the major complaints of the British people for Brexit is, the argument that labor mobility
enforced by EU on England, cause wage level of British workers to fall. Assume this claim of British citizens is correct. Show on two seperate graphs, one representing British labor market, the other labor market of the rest of EU. And show the effect of labor mobility in both markets. Explain in a few words the reason behind this process.

Answer 1

Solution:

In the EU labor market, the supply of labor resources with a certain set of skills is declining. In the graph, the new offer function is shown in red.This situation leads to an increase in equilibrium wages.

For British citizens, the following schedule.

Labor supply increases, leading to a decrease in equilibrium wages.