Equilibrium unemployment is unemployment caused despite the fact that there are people in the labor force and is normally blamed due to the lack of supply of labor. This type of unemployment can bestructural, seasonal or frictional. Structural unemployment is when due to occupational or geographic immobility people don’t have the skills or the ability to move to a place where the type of laborthey can offer is demanded. Seasonal unemployment is when an industry only operates during a restricted season for example tourism and frictional unemployment is caused due to the fact that people seekbetter jobs. The problem of equilibrium unemployment is illustrated in the graph below.
This form of unemployment isn’t bad for the economy since it isn’t particularly hard to combat andconsidering the fact that it is anticipated an economy will have some form of unemployment. However the government should still pursue policies to combat it. The best policy for the government to pursuewould be a supply side policy which aims at improving the quality and the quantity of the factors of production namely land, labor, capital and entrepreneurship. The government could improve labor inthis situation by using several techniques. For example it could educate people in school or university about jobs they could pursue so as to eliminate frictional unemployment. In order to eliminateseasonal unemployment the government could increase the period of a person’s employment, for instance they could increase the length of the tourism period. Finally in order to eliminate structuralunemployment it could improve transport so as to eliminate geographic immobility and it could improve people’s education s o as to decrease occupational immobility. The above ways are methods of improvinglabor as a factor of production and consequently reducing unemployment which is very effective however it takes a long time to show results. The result of this is illustrated in the following diagram....
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