SupplyDemandApps - EEP 100 Perloff Supply and Demand...

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EEP 100 Perloff Supply and Demand Application: Occupational Licensing To work in many occupations in the United States, you must have a license. More than 800 occupations require licenses issued by local, state, or the federal government agencies, including animal trainers, dietitians and nutritionists, doctors, electricians, embalmers, funeral directors, hair dressers, librarians, nurses, psychologists, real estate brokers, respiratory therapists, sales people, teachers, and tree trimmers (but not economists). During the early 1950s, fewer than 5% of U.S. workers were in occupations covered by licensing laws at the state level. Since then, the share of licensed workers has grown, reaching nearly 18% by the 1980s, at least 20% in 2000, and 29% in 2008. Licensing is more common in occupations that require extensive education: more than 40% of workers with a post-college education are required to have a license compared to only 15% of those with less than a high school education. To obtain a license in some occupations, you must pass a test, which is frequently designed by licensed members of the occupation. By making exam difficult, current members of the occupation can limit entry by new workers. For example, only 33.5% of people taking the California State Bar Examination in February 2009 passed it, even though all of them had law degrees. (The national rate for lawyers passing state bar exams in 2008 was higher, but still only 71%.) To the degree that testing is objective, licensing may raise the average quality of the workforce. However, too often its primary effect is to restrict the number of workers in an occupation. Kleiner and Kruger (2009) find that licensing raises occupational wages by 14% on average. Question: What are the effects of occupational licensing on a labor market’s wage and the quantity of labor employed? © Copyright Jeffrey M. Perloff, 2010. All federal and state copyrights reserved for all original material presented in this course through any medium, including lecture or print. This material may not be duplicated or disseminated without permission.
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Application: Genetically Modified Foods A genetically modified (GM) food has had its DNA altered through genetic engineering rather than through conventional breeding. The introduction of GM techniques can affect both the supply and demand curves for a crop. The first commercial GM food was Calgene’s Flav Savr tomato, a tomato that resisted rotting and that, the company claimed, could stay on the vine longer to ripen to full flavor. It was first marketed in 1994 without any special labeling (however, it is no longer sold). Other common GM crops include corn, canola, cotton, rice, soybean, and sugar cane. Countries growing substantial amounts of these crops include the United States, Argentina, Canada, Brazil, China, and South Africa. Using GM techniques, farmers can produce more output at a given cost, so that the quantity supplied at any given price increases and the supply curve shifts to the right. Some scientists and consumer groups have raised safety concerns about GM crops. In
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This note was uploaded on 02/04/2011 for the course EEP 100 taught by Professor Perloff during the Spring '10 term at Berkeley.

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SupplyDemandApps - EEP 100 Perloff Supply and Demand...

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