The Application “Occupational Licensing” analyzed the effect of exams in licensed occupations given that their only purpose was to shift the supply curve to the left. How would the analysis change if the exam also raised the average ability of people in that occupation, which affects the demand curve?
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The Application "Occupational Licensing" analyzed the effect of exams in licensed occupations given that their only purpose was to shift the supply curve to the left. How would the analysis change if the exam also raised the average quality of people in that occupation, thereby also affecting demand? The figure to the right illustrates the labor market for occupations with licenses. The equilibrium is initially e_1; however, with occupational licensing, the supply curve shifts to the left, raising the market equilibrium to e_2 Use the line drawing tool to show how raising the average quality of people in licensed occupations affects the demand curve for workers in licensed occupations. Label this line 'D_3'. Use the point drawing tool to indicate the new market equilibrium. Label this point 'e_3'. Carefully follow the instructions above, and only draw the required objects.
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