wages of high-skill and low-skill workers? For this question, the four-step process of analyzing how shifts in

supply or demand affect a market (introduced in Demand and Supply) works in this way:

Step 1. What did the markets for low-skill labor and high-skill labor look like before the arrival of the new
technologies? In Figure 4.3 (a) and Figure 4.3 (b), S0 is the original supply curve for labor and D0 is the original
demand curve for labor in each market. In each graph, the original point of equilibrium, E0, occurs at the price

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W0 and the quantity Q0.

4.1 • Demand and Supply at Work in Labor Markets 93

FIGURE 4.3 Technology and Wages: Applying Demand and Supply (a) The demand for low-skill labor shifts to the

left when technology can do the job previously done by these workers. (b) New technologies can also increase the

demand for high-skill labor in fields such as information technology and network administration.
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