Wage and Price Effects of Immigration. In the initial equilibrium in the market for farm workers, the wage is $10 per hour. The elasticity of supply of farm workers is 2.0, and the elasticity of demand for farm workers is 1.0. Suppose that immigration increases the supply of farm workers by 12 percent: The supply curve shifts to the right by 12 percent. (Related to Application 2 on page 690.)
a. Use the price-change formula discussed in an earlier chapter on elasticity to compute the change in the equilibrium wage.
b. Suppose that farm workers are responsible for onefourth of the production cost of food. What are the implications of immigration for the cost of producing food and its price?