ed out to Oy\ The demand for labor in sector Y is pulled rightward with the boundary. The new intersection of the labor demand curves shows that labor expands in both sectors, and therefore output of both X and Y also expand. The relative expansion of output is ambiguous. Wages paid to workers fall.РGraph the effect on the equilibrium for the numerical example in problems 2 and 3, given a relative price of 1, when the labor force expands from 100 to 140.РWith the law of diminishing returns, the new production possibility frontier is more concave and steeper (flatter) at the ends when total labor supply increases.РLi increase to 90 from 62 and L2 increases to 50 from 38. Wages decline from 0.74 to 0.60. This new allocation of labor leads to a new output mix of approximately Qi=85 and Q2=77.
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