Rival Industry Pay Surge
The question
The competitive labor market for commercial truck drivers in the region of Marloway is in equilibrium. A booming natural gas industry nearby begins offering much higher pay, and many qualified drivers leave trucking to take those jobs. Assume the price of freight services and driver productivity are unchanged. Show the effect on the labor market for truck drivers. 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.
Rival Industry Pay Surge: the worked answer
On the Labor Market graph, Labor supply (SL) shifts left.
Why Labor supply (SL) shifts left
Wages available in other occupations are a determinant of labor supply. When the gas industry offers higher pay, the opportunity cost of driving trucks rises and fewer people are willing to work as drivers at every wage, so the labor supply curve shifts to the left. Because freight prices and driver productivity are unchanged, each worker's marginal revenue product is unchanged, so firms' labor demand curve does not move.
What happens to the equilibrium
The equilibrium market wage rises and the level of employment decreases.
The mistake students make on this one
A frequent error is shifting labor demand left because employment ends up lower, with students reasoning that trucking firms 'hire fewer drivers.' Firms hiring fewer drivers here is a movement UP along an unchanged labor demand curve as the wage rises; MRP itself depends on freight prices and productivity, which the stem freezes.
On exam day
Wage UP with employment DOWN can only come from a leftward supply shift, so let that combination confirm your answer before you move on.
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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