Answer to 1.1 - Labour Market Graph and Explanation

A labour market demand and supply graph for skilled production workers at Zenith Electronics would illustrate the wage rate on the vertical axis and the quantity of labour on the horizontal axis.

• The demand for labour (D_L) curve slopes downwards, indicating that as the wage rate decreases, firms are willing to hire more workers.
• The supply of labour (S_L) curve slopes upwards, indicating that as the wage rate increases, more workers are willing to offer their labour.
• The equilibrium wage (W_e) and equilibrium quantity of labour (Q_e) occur where the demand and supply curves intersect.

To illustrate a shortage of skilled production workers, a horizontal line representing the current market wage (W_m) would be drawn below the equilibrium wage (W_e). At this lower wage rate (W_m):

• The quantity of labour demanded (Q_D) by Zenith Electronics would be greater than the quantity of labour supplied (Q_S) by workers.
• The difference between Q_D and Q_S (i.e., Q_D - Q_S) represents the shortage of skilled production workers.

This graph illustrates that at the prevailing wage rate, Zenith Electronics cannot find enough skilled workers to meet its production needs, leading to the reported delays and increased overtime costs. The market is not clearing at W_m, indicating upward pressure on wages to reach W_e and eliminate the shortage.

Two factors that affect the demand for smartphones are:

• Consumer Preferences/Tastes: Changes in consumer preferences directly impact demand. If consumers develop a stronger preference for smartphones due to new features, technological advancements, or social trends, the demand for smartphones will increase. Conversely, if preferences shift away (e.g., towards other devices or simpler phones), demand will decrease. The passage mentions "changing consumer preferences" as a driver of increased demand for Zenith's products.
• Price of Related Goods (Substitutes): The availability and price of substitute products significantly influence demand. If competitors release more affordable alternative smartphones, as mentioned in the passage, consumers may switch to these cheaper options. This would lead to a decrease in the demand for Zenith's smartphones, even if Zenith's own prices remain constant.

One factor that affects the supply for electronic devices is:

• Cost of Production: The cost of inputs required to produce electronic devices directly impacts a firm's willingness and ability to supply. If production costs increase, profitability decreases, leading firms to supply less at any given price. The passage highlights "labour shortage caused delays in production schedules and increased overtime costs." Increased labour costs (due to overtime or higher wages to attract skilled workers) would increase the overall cost of production for Zenith, thereby reducing its supply of electronic devices. Conversely, strategies like "Exploring automation to reduce reliance on manual labour" aim to lower production costs and potentially increase supply.