Let E = En + Ei denote the total size of the labor force, where En and Ei represent native-born workers and immigrants, respectively (measured in thousands). Assume that immigrants supply that labor inelastically, and the supply of native-born workers is governed by w=4En. The demand for labor is w=120–8Ed.
a) Suppose that initially there is no immigration at all: Ei =0. What is the equilibrium wage and level of employment?
b) Now suppose that there is some immigration and Ei = 6. What happens to the equilibrium wage, total employment, and the employment of native-born workers?