In an Economy with Flexible Prices, Competitive Factor Markets, and Fixed

question 118

Essay

In an economy with flexible prices, competitive factor markets, and fixed supplies of the factors of production, graphically illustrate the impact of a change in immigration policy in a country that permits a huge influx of foreign workers into the labour market, ceteris paribus. Be sure to label the axes, the curves, the initial equilibrium values, the direction the curve's shift, and the terminal equilibrium values. Explain in words how the equilibrium values of labour, the real wage, saving, investment, and the real interest rate change.

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Definitions:

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, typically resulting from factors like mass production and bulk purchasing.

Functional Lines

The demarcation of responsibilities and tasks in an organization based on specific functions such as marketing, finance, or human resources.

Functional Expertise

Specialized knowledge or proficiency in a particular area or discipline within a professional context.

Economies of Scale

The cost advantage that arises with increased output of a product, leading to a lower cost per unit.