Sia
Question
Macroeconomics
Posted 10 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 decreases; the quantity of labor demanded increases
(B) The quantity of labor supplied doesn't change; the quantity of labor demanded increases
(c) The quantity of labor supplied increases; the quantity of labor demanded decreases
(D) The quantity of labor supplied increases; the supply of labor increases
(E) Labor supply increases; labor demand increases
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Answer from Sia
Posted 10 months ago
Solution
a
Basic Economic Principle: According to basic economic principles, an increase in the wage rate typically leads to an increase in the quantity of labor supplied as more workers are willing to work at higher wages
b
Law of Demand: Conversely, the law of demand states that an increase in the wage rate will lead to a decrease in the quantity of labor demanded as employers will be less inclined to hire at higher wage costs
Answer
(C) The quantity of labor supplied increases; the quantity of labor demanded decreases
Key Concept
Wage Rate and Labor Market Equilibrium
Explanation
An increase in the wage rate results in a higher quantity of labor supplied due to more workers being willing to work, and a lower quantity of labor demanded as employers seek to reduce costs.
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