Question

Millions of people from Mexico have migrated to the United States. This has reduced the supply of labor in Mexico and increased the supply of labor in the United States. Assume that the demand for labor in Mexico and the United States is unchanged. Then wages in the United States​ ________ and wages in Mexico​ ________.
A) fall; rise
B) rise; do not change
C) rise; rise
D) do not change; fall
E) fall; fall

Answer 1

Answer:

A) fall; rise

Explanation:

If Labour migrates to the US, the supply of labour would increase while demand remains the same. This would lead to an excess supply of labour and wages would fall.

Because a lot of labour have moved to the US, the supply of labour in Mexico would fall. This would lead to a shift in the supply curve of labour to the left. Wages would rise.

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