hour. Assume that workers can switch easily between the two
jobs.
a. Draw diagrams showing the supply and demand for
labour in each market.
b. Now suppose there is a sharp increase in the demand for
steel pipe. Explain what happens in the market for steel-
pipe workers.
c. If the employment of steel-pipe workers increased in part
(b), explain where the extra workers came from.
d. What effect does the event in part (b) have on the market
for sheet-iron workers?
e. What is the long-run effect of the shock on the relative
wages in the two types of jobs?
10. How much of the following payments for factor services is likely
to be economic rent? Explain why.
a. The $750 per month that a landlord receives for renting
an apartment
b. The salary of the Canadian prime minister
c. The annual income of Roger Federer or Lady Gaga
d. The salary of a window cleaner who says, “It’s dangerous
work, but it beats driving a truck.”
e. An engineer at Google headquarters who loves going to
work every day
11. It is common to hear comments like “Why do baseball players
earn millions of dollars a year for their negligible contribution to
society while major contributors—such as schoolteachers, police
officers, firefighters, and ambulance drivers—earn barely enough
sean pound
(Sean Pound)
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