Reference no: EM132456892

Explain why the following statement is false: Based on the evidence on the return to high school graduation, the demand for workers with a high school education grew more quickly than the supply of high school graduates between 1900 and 1950. Assume we have a supply and demand model of labor with a downward sloping demand curve and an upward sloping supply curve. The equilibrium wage, which is directly related to the rate of return on education, can fall when demand shifts out more slowly than supply shifts out. From the evidence we have seen in class and from our readings, the rate of return to high school fell over the period 1900-1950. We also know that the graduation rates from high school increased and so shifted supply out enormously between 1890 and 1960. Therefore we surmise that the supply of educated workers shifted out faster than demand shifted out.