Consider an economy with two industries: auto manufacturing and aircraft manufacturing. a. If workers in these two...

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Economics

Consider an economy with two industries: auto manufacturing andaircraft manufacturing.
a. If workers in these two industriesrequire similar amounts of training, and if workers at thebeginning of their careers could choose which industry to trainfor, what would you expect to happen to the wages in these twoindustries? How long would this process take? Explain?
b. Suppose that one day the economyopens itself to international trade and as a result, startsimporting autos and exporting aircraft. What would happen to demandfor labor in these two industries? And as a result, what wouldhappen to the wages in these two industries in the short run?
c. Do you think that the wagedifferential between these industries will continue over the longertime horizon? What would happen to the wages in these industries inthe long term period? Explain.

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3.6 Ratings (264 Votes)

a In short run the wages can be differeant in two industries Suppose wages in aircraft manufacturing is more than in auto manufacturing So more number of people will choose aircraft manufacturing this will increase supply of labour in this industry and the wages See Answer

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