Step 1. Before the new technologies, each market has an original supply curve S₀ and demand curve D₀, with the equilibrium E₀ at wage W₀ and quantity Q₀.
Step 2. Does the technology affect the supply of labor from households or the demand for labor from firms? It affects the demand for labor by the firms that hire workers.
Step 3. Increase or decrease? As a substitute for low-skill labor becomes available, demand for low-skill labor shifts left, from D₀ to D₁ (panel a). As the technology complement for high-skill labor becomes cheaper, demand for high-skill labor shifts right, from D₀ to D₁ (panel b).
Step 4. The new equilibrium for low-skill labor, E₁ at W₁ and Q₁, has a lower wage and fewer workers hired than E₀. The new equilibrium for high-skill labor has a higher wage and more workers hired. The model predicts that computer and communications technology raises the pay of high-skill workers and reduces the pay of low-skill workers.