Machinists Reach Retirement
The question
The competitive labor market for skilled machinists in the Verrin Valley is in equilibrium. An unusually large generation of machinists reaches retirement age over a single year and leaves paid work permanently, and few younger residents have trained for the trade. Assume the prices the valley's tool shops receive for their parts and the productivity of the remaining machinists are unchanged. Show the effect on the labor market for machinists. 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.
Machinists Reach Retirement: the worked answer
On the Labor Market graph, Labor supply (SL) shifts left.
Why Labor supply (SL) shifts left
Retirement removes people from the pool of workers offering their labor, so at every wage fewer machinists are willing and able to work and the labor supply curve shifts to the left. The demand for labor is the marginal revenue product of labor, which equals marginal product times the price of the output. With both parts prices and the productivity of remaining machinists held constant, MRP is unchanged, so the labor demand curve stays put.
What happens to the equilibrium
The equilibrium market wage rises and the level of employment decreases.
The mistake students make on this one
A common wrong answer shifts labor demand left, reading 'workers leaving' as the industry shrinking. The tool shops still value each machinist exactly as much as before, since parts prices and productivity have not changed; what shrank is the number of people available to hire, which is a supply-side change.
On exam day
When a stem mentions that replacements are not being trained, it is telling you the supply shift is permanent rather than a temporary dip, so shift the whole curve left instead of sliding along it.
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 left 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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