📚 Learning Guide
Demand and Supply in Labor Markets
hard

In a labor market where demand for labor is influenced by fringe benefits, which of the following scenarios would lead to a new labor market equilibrium?

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Choose the Best Answer

A

An increase in fringe benefits offered by employers leading to higher demand for labor.

B

A decrease in the minimum wage causing a surplus of labor.

C

A significant rise in unemployment benefits reducing the supply of labor.

D

An increase in the overall number of jobs available without a corresponding increase in fringe benefits.

Understanding the Answer

Let's break down why this is correct

Answer

In a labor market, the demand for workers can change based on the benefits that come with a job, like health insurance or paid vacation. If a company decides to offer better fringe benefits, it can attract more applicants, which increases the demand for labor. For example, if a tech company starts offering free gym memberships and flexible working hours, more people will want to work there, shifting the demand curve to the right. This shift means that at the original wage, there are more job seekers than jobs available, leading to higher wages until a new equilibrium is reached. Eventually, the market will adjust, and a new balance will be found between the number of workers wanting jobs and the number of jobs available with those attractive benefits.

Detailed Explanation

When employers offer more fringe benefits, more people want to work for them. Other options are incorrect because Some might think lowering the minimum wage helps everyone find jobs; It's easy to think that higher unemployment benefits mean fewer people will look for jobs.

Key Concepts

labor demand
labor market equilibrium
fringe benefits
Topic

Demand and Supply in Labor Markets

Difficulty

hard level question

Cognitive Level

understand

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