Sia
Question
Microeconomics
Posted 8 months ago
Which of the following best describes what happens in the market for labor if the wage rate increases?
Choose 1 answer:
(A) The quantity of labor supplied doesn't change; the quantity of labor demanded increases
(B) The quantity of labor supplied increases; the quantity of labor demanded decreases
(c) The quantity of labor supplied decreases; the quantity of labor demanded increases
(D) Labor supply increases; labor demand increases
(E) The quantity of labor supplied increases; the supply of labor increases
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Answer from Sia
Posted 8 months ago
Solution
a
Law of Supply: According to the law of supply, an increase in the wage rate typically leads to an increase in the quantity of labor supplied. This is because higher wages make work more attractive to potential workers
b
Law of Demand: According to the law of demand, an increase in the wage rate typically leads to a decrease in the quantity of labor demanded. This is because higher wages increase the cost of labor for employers, leading them to hire fewer workers
c
Equilibrium Adjustment: In the labor market, the equilibrium wage rate is determined by the intersection of the labor supply and labor demand curves. An increase in the wage rate above the equilibrium will result in a surplus of labor, where the quantity of labor supplied exceeds the quantity of labor demanded
d
Correct Answer: Based on the laws of supply and demand, the best description of what happens in the market for labor if the wage rate increases is: The quantity of labor supplied increases; the quantity of labor demanded decreases
Answer
(B) The quantity of labor supplied increases; the quantity of labor demanded decreases
Key Concept
Law of Supply and Demand in Labor Market
Explanation
When the wage rate increases, the quantity of labor supplied increases because more workers are willing to work at higher wages. Conversely, the quantity of labor demanded decreases because employers are less willing to hire at higher wages.
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