I must admit I got the wrong answer, Professor Kling. Of course, the immediate reason for any shortage or glut is that prices are "wrong" and don't clear markets for some reason. I read the question to mean "What was the underlying reason for the shortage to arise?" Assuming the market for labor had been in some sort of equilibrium in…
I must admit I got the wrong answer, Professor Kling. Of course, the immediate reason for any shortage or glut is that prices are "wrong" and don't clear markets for some reason. I read the question to mean "What was the underlying reason for the shortage to arise?" Assuming the market for labor had been in some sort of equilibrium in the recent past, the underlying reason it was knocked out of equilibrium was a shift in the "labor supply curve" because of answers (a), (b) and (c), so I picked answer (d), "All of the above." Once the labor supply curve shifted, prices - that is wages and salaries - needed to adjust upward but failed to do so because they are "sticky" for the reasons Arnold described.
Professor Kling, can I still get credit for my answer? I'm really hoping to work as an economist someday, i.e., now.
I must admit I got the wrong answer, Professor Kling. Of course, the immediate reason for any shortage or glut is that prices are "wrong" and don't clear markets for some reason. I read the question to mean "What was the underlying reason for the shortage to arise?" Assuming the market for labor had been in some sort of equilibrium in the recent past, the underlying reason it was knocked out of equilibrium was a shift in the "labor supply curve" because of answers (a), (b) and (c), so I picked answer (d), "All of the above." Once the labor supply curve shifted, prices - that is wages and salaries - needed to adjust upward but failed to do so because they are "sticky" for the reasons Arnold described.
Professor Kling, can I still get credit for my answer? I'm really hoping to work as an economist someday, i.e., now.