activity 6.1 study the diagram below depicting the market - demand and supply curves in equilibrium at a…

activity 6.1 study the diagram below depicting the market - demand and supply curves in equilibrium at a wage rate of w1 and the level of employment at q1. 6.1.1 redraw the above diagram to show the effect on the wage rate and employment level if there is a shift towards capital - intensive production techniques in south africa. (8)

activity 6.1 study the diagram below depicting the market - demand and supply curves in equilibrium at a wage rate of w1 and the level of employment at q1. 6.1.1 redraw the above diagram to show the effect on the wage rate and employment level if there is a shift towards capital - intensive production techniques in south africa. (8)

Answer

Explanation:

Step1: Understand the market - labor model

The standard labor - demand and labor - supply model has labor - demand (D) downward - sloping and labor - supply (S) upward - sloping, with wage rate on the y - axis and employment level on the x - axis.

Step2: Analyze the shift due to spatial - intensification

Spatial - intensification production techniques likely change the relationship between wage rate and employment. If it makes production more efficient in a spatial sense, it may increase the demand for labor (shift D to the right) as firms can produce more with the same or less cost. This would lead to an increase in both the wage rate and employment level.

Step3: Redraw the diagram

Draw a new labor - demand curve D' to the right of the original D. The new equilibrium point where D' intersects S will have a higher wage rate and a higher employment level compared to the initial equilibrium.

Answer:

Draw a new labor - demand curve D' to the right of the original labor - demand curve D in the given diagram. The new equilibrium point (intersection of D' and S) will show a higher wage rate and a higher employment level.