Answer to Question #261937 in Economics of Enterprise for Laila

Question

As a result of the CORONAVIRUS pandemic, the demand for some cadres of jobs have experienced a dramatic increase between 2020 and 2021.The demand for truck driving jobs, for example, have been observed to have increased during the period aforementioned, in the US and in the EU region: Required: a) Using diagram(s), use the information above to illustrate the expected effect of increase in demand on truck drivers’ income in 2021. b) Ceteris paribus, will the cost of hauling goods increase, or decrease in 2021? Illustrate using diagram(s). 

Answer 1

(a)

The demand curve depends on the marginal productivity of labor i.e. the truck drivers, and the and the price of the serveice that the truck drivers offer.

An increase in demand for truck drivers will result in an increase in their income because their wages will be raised.

As shown in the diagram above, when demand raises from $D_0$ to $D_1$ , the level of wages raises from $W_0$ to $W_1$.

(b)

The cost of hauling goods will increase. This is so as to cover up the extra cost incurred in payment of more wages to truck drivers.