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  3. A medium-sized city has two major industries: financial services and manufacturi

A medium-sized city has two major industries: financial services and manufacturi

游客2025-06-21  16
问题 A medium-sized city has two major industries: financial services and manufacturing of electronic equipment. Suppose that restrictions on interstate competition in the market for financial services lead to a large expansion of the financial services sector in the city.
(a)What effect do you predict that this increase in jobs would have oil wages and housing prices in the city?
(b)What effect do you think there would be on the manufacturing sector in the city? Would you expect that manufacturing employment would rise or fall?
选项
答案 (a)An increase in the demand for labor should increase wages in equilibrium. Higher wages will attract new workers to the city, as well as raise the incomes of all workers in the city. This, in turn, should increase the demand for housing, and thus raise the price of housing.
(b)Wages in the manufacturing sector would presumably rise due to competition for workers from other sectors. Increased housing would also raise the wages needed to attract new workers from other cities. Thus, this city’s manufacturing sector faces higher costs than manufacturing in the other cities. If file electronics industry is mobile, firms are likely to transfer production to other cities. Hence, manufacturing employment will likely fall when employment in the other sectors rises.
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