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Labor Supply and Demand Graphing
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In a labor supply and demand graph, what happens to the equilibrium wage when the demand for labor increases while the supply remains constant?

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Choose the Best Answer

A

The equilibrium wage decreases

B

The equilibrium wage remains the same

C

The equilibrium wage increases

D

The equilibrium wage becomes zero

Understanding the Answer

Let's break down why this is correct

Answer

When the demand for labor increases while the supply stays the same, the equilibrium wage will go up. This happens because more employers are looking to hire workers, which creates competition for available jobs. As a result, employers are willing to pay higher wages to attract the workers they need. For example, if a factory suddenly needs more workers to meet a new order, it might raise its pay to attract job seekers, leading to an overall increase in wages in that area. So, with higher demand and constant supply, wages rise until a new balance is found.

Detailed Explanation

When more companies want to hire workers, they offer higher wages to attract them. Other options are incorrect because Some might think that more demand means lower wages; It's a common mistake to think that if supply doesn't change, wages won't change either.

Key Concepts

Labor demand
Topic

Labor Supply and Demand Graphing

Difficulty

easy level question

Cognitive Level

understand

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