Answer to Question #85551 in Economics for Devon Johnson

Question

Predict how each of the following events will raise or lower the equilibrium wage and quantity of oil workers in Texas. In each case, sketch a demand and supply diagram to illustrate your answer.
a. The price of coal rises.
b. New oil-drilling equipment is invented that is
cheap and requires few workers to run.
c. Several major companies that do not mine coal open factories in Texas, offering many well-paid
jobs outside the oil industry.
d. Government imposes costly new regulations to
make oil-drilling a safer job.

Answer 1

a) As the price of coal rises - demand for oil grows, wage increases, quantity of workers increases;

b) New oil-drilling equipment is invented that is cheap and requires few workers to run – demand for oil decreases, wage decreases, quantity of workers decreases;

c) Several major companies that do not mine coal open factories in Texas, offering many well-paid jobs outside the oil industry – supply of oil decreases, wage increase, quantity of workers decreases;

d) Government imposes costly new regulations to make oil-drilling a safer job – supply of oil grows, wage decreases, quantity of workers increases.