Frostvale Immigration Reform
The question
Frostvale relaxes its immigration restrictions, and a large number of new working-age immigrants enter the labor force seeking jobs in the construction industry. Show the effect on the competitive labor market for construction workers. Assume worker productivity and the price of construction output are unchanged. Show the effect on the Labor Market graph.
Drag a curve, or use the arrow buttons. Want the free-play version with every control? Open this graph in the sandbox.
Frostvale Immigration Reform: the worked answer
On the Labor Market graph, Labor supply (SL) shifts right.
Why Labor supply (SL) shifts right
The inflow of working-age immigrants increases the number of workers willing and able to work at every wage, which affects the supply side of the labor market. Because worker productivity and the output price are unchanged, the marginal revenue product of labor is unchanged, so firms' hiring schedule stays put. Only the quantity of labor offered at each wage has changed.
What happens to the equilibrium
The equilibrium market wage falls and the level of employment increases.
The mistake students make on this one
A common wrong answer shifts labor demand right too, on the logic that more immigrants means more customers and therefore more construction. This graph is one industry's labor market, not the whole economy: labor demand here is MRP, and the stem explicitly freezes both construction output prices and productivity, so MRP cannot move.
On exam day
Sort every stem by who it acts on: if it changes how many PEOPLE are willing to work, it is a labor supply determinant; if it changes what a worker adds to the FIRM's revenue, it is labor demand.
How this is graded
The checker reads every curve's position before and after your answer. You are marked correct only when Labor supply (SL) shifts right and every other curve on the Labor Market graph stays where it started — the same standard an AP reader applies to a drawn graph: the right shift, and nothing extra. There is no AI involved; the rubric is the geometry.
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