New Jigs, New Housing
The question
The competitive labor market for electronics assembly technicians in the town of Halvern is in equilibrium. Assembly firms install optical alignment jigs that cut the time a technician needs to position and solder each circuit board, so a technician completes more boards per shift. In the same quarter developers finish a housing project approved years earlier, and many more people can now afford to live within commuting distance of the plants. Assume the price the firms receive for a finished board is unchanged, and show the effect on the labor market for assembly technicians. 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.
New Jigs, New Housing: the worked answer
On the Labor Market graph, Labor demand (DL) shifts right and Labor supply (SL) shifts right.
Why Labor demand (DL) shifts right and Labor supply (SL) shifts right
The jigs are held and used by the technicians rather than replacing them, so they raise each technician's marginal product. With the price of a finished board held constant, marginal revenue product, which equals marginal product times output price, rises at every quantity of labor, so firms want more technicians at every wage and labor demand shifts right. The housing project acts on the other side of the market: more people can now live close enough to take these jobs, so the number of workers willing and able to work at every wage rises and labor supply shifts right. Both shifts raise the number of technicians employed, so equilibrium employment definitely rises. The demand shift pushes the wage up while the supply shift pushes it down, so the equilibrium wage is indeterminate: it rises if the demand shift is larger, falls if the supply shift is larger, and is unchanged if the two are equal.
What happens to the equilibrium
Equilibrium employment definitely rises, while the equilibrium wage is indeterminate and depends on the relative size of the two shifts.
The mistake students make on this one
The signature wrong answer is that employment rises and the wage rises, because students remember that higher productivity raises MRP and therefore pay, and they never weigh the housing shift against it. With both curves moving right the quantity axis is settled and the wage is not, so claiming a direction for the wage is exactly the error the question is testing. A separate trap is shifting labor demand LEFT because the jigs sound like automation; these jigs make each worker faster rather than doing the worker's job, so they are a complement that raises MRP.
On exam day
Memorize the shortcut for same-direction shifts: when both curves move the same way, the quantity outcome is determinate and the price outcome, here the wage, is the indeterminate one, so spend your writing on naming what the wage depends on rather than guessing it.
How this is graded
The checker reads every curve's position before and after your answer. You are marked correct only when Labor demand (DL) shifts right and 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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