Fig. 1 Product Markets and Factor Markets Demand for Goods and Services Supply of Goods and Services S D Households Firms S D Supply of Resources Demand for Resources Factor Markets

Fig. 2 A Competitive Labor Market Hourly Wage LS $12 LD 10,000 Number of Workers

Fig. 3 Disappearing Wage Differentials (b) Hourly Wage Hourly Wage B $30 A' $25 25 B' 20 A LD LD Number of Elementary School Teachers Number of Computer Systems Analysts

Fig. 4 The Market for Physicians Salaries 2. AMA restrictions on the supply of physicians move the market here. C 3. Other policies to increase demand for physicians move the market here, at final wage rate W3. W3 W2 B A W1 1. Without AMA activities to increase salaries, equilibrium is here, at wage rate W1. Number of Physicians

Fig. 5a Union Wage Differentials 2. A union wage of for long-haul truckers of W2 creates an excess supply of workers. LS A' W2 W1 A 1. With no labor union, both long- and short-haul truckers earn the same wage rate, W1. LD 250,000 350,000 300,000 Number of Long-haul Truckers

Fig. 5b Union Wage Differentials 3. Unemployed long-haul truckers move to the nonunion short-haul market, and the labor supply curve shifts rightward . . . Wage B W1 B' W3 4. pushing the short-haul wage rate down to W3. LD 200,000 Number of Short-haul Truckers 225,000

Fig. 6 Employer Discrimination and Wage Rates Sector A (Discriminating) Sector B (Nondiscriminating) Wage Wage E' W3 F W1 W1 E W2 F' LD LD Number of Workers Number of Workers

Fig. 7 The Vicious Cycle of Discrimination Current Job Discrimination Lower Wage Lower Human Capital Investment Unemployment Lower Skill Level Less Job Experience Pre-market Discrimination

Fig. 8a/b The Minimum Wage Unskilled Labor Covered by Law Unskilled Labor Not Covered by Law Hourly Wage Hourly Wage A minimum wage raises pay, but decreases jobs in the covered sector. Some who can't find work go to the uncovered sector, lowering wages there. LS A' $5.15 B 4.00 $4.00 B' A LD 3.00 LD N2 N1 N3 Number of Workers Number of Workers

Fig. 8c The Minimum Wage (c) Skilled Labor Hourly Wage LS $24.00 C' 20.00 C As capital is substituted for unskilled labor, demand for skilled workers goes up, raising the skilled wage rate. Number of Workers