Auto Plant Closes
The question
The competitive labor market for warehouse loaders in the city of Ashmoor is in equilibrium. Across town, an unrelated automobile assembly plant shuts down permanently, and its former assembly workers have physical skills that transfer directly to warehouse loading. Assume the prices Ashmoor's warehouses charge for their services and loader productivity are unchanged. Show the effect on the labor market for warehouse loaders. 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.
Auto Plant Closes: the worked answer
On the Labor Market graph, Labor supply (SL) shifts right.
Why Labor supply (SL) shifts right
Opportunities in other occupations are a determinant of labor supply, and when the assembly plant closes, the alternative that kept those workers out of warehouse work disappears. With skills that transfer directly, more people are now willing and able to load warehouses at every wage, so labor supply shifts to the right. Warehouse service prices and loader productivity are unchanged, so each loader's marginal revenue product is unchanged and labor demand stays put.
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 error is shifting labor demand left because the stem describes a plant closing and job losses, which students read as a shrinking economy. The closure happened in the automobile market; on this graph the axis is warehouse loading, where nothing changed about the output price or productivity, so only the pool of available workers moved.
On exam day
Read the axis label before you touch a curve: events in a NEIGHBORING industry usually reach your market through workers moving between jobs, which is always a labor supply shift.
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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