Question: In recent years, there has been a great deal of concern in the U.S. about outsourcing-- work done for American companies by foreign workers instead of its original workers. To analyze this issue, assume that Microsoft and other American companies initially rely solely on U.S. workers for software development, and then they realize that they can rely on much cheaper labor in India for this purpose.

Draw diagrams showing what will happen in three labor markets:

(a) F_S : foreign software developers (who live in India)

(b) N_S: native software developers (who live in the U.S.)

(c) No: native workers (who live in the U.S.) and are gross complements with software developers, e.g., workers who market and sell software.

How are U.S. consumers likely to be affected?