Explanation:
The correct answer is: wages decrease, and quantity increase.
In the short run, an influx of immigrant workers increases the labor supply, shifting the supply curve to the right. This leads to:
- A decrease in the equilibrium wage (as the supply of labor exceeds the demand)
- An increase in the quantity of labor demanded (as businesses take advantage of the cheaper labor)
This is a classic example of the law of supply and demand in action. The increased supply of labor puts downward pressure on wages, making labor cheaper, which in turn increases the quantity demanded by businesses.
Here's a graphical representation:
Before the influx:
- Labor supply curve (S0)
- Labor demand curve (D0)
- Equilibrium wage (W0)
- Equilibrium quantity (Q0)
After the influx:
- Labor supply curve shifts right (S1)
- Labor demand curve remains the same (D0)
- New equilibrium wage (W1) is lower than W0
- New equilibrium quantity (Q1) is higher than Q0
