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Author Question: How does the demand for high-skilled workers compare to the demand for low-skilled workers? Why does ... (Read 199 times)

bb

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How does the demand for high-skilled workers compare to the demand for low-skilled workers? Why does this difference exist?
 
  What will be an ideal response?

Question 2

Describe the consumer equilibrium in the indifference curve/budget line model.
 
  What will be an ideal response?



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kiamars2010

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Answer to Question 1

The demand for high-skilled workers exceeds the demand for low-skilled workers because the marginal revenue product of high-skilled workers exceeds the marginal revenue product of low-skilled workers.

Answer to Question 2

A consumer equilibrium occurs when the consumer is spending his or her entire income (is on the budget line), and is on the highest attainable indifference curve (is consuming the best point on the budget line).The equilibrium occurs at the point where the budget line just touches the highest indifference curve at one point. At this point, the budget line and indifference curve have the same slope, so the marginal rate of substitution (the slope of the indifference curve) is equal to the relative price (the slope of the budget line).





 

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