Consider the labor market illustrated in the figure to the right. Labor supply1
ID: 1103281 • Letter: C
Question
Consider the labor market illustrated in the figure to the right. Labor supply1 Suppose the price of the product increases. What effect will this have on the labor market? 1.) Use the line drawing tool to draw either a new labor demand curve (Labor demand2) or a new labor supply curve (Labor supply2) that shows the effects of this change. Properly label this line. 2.) Use the point drawing tool to indicate the new equilibrium wage and employment level. Label this point 'Equilibrium'. Carefully follow the instructions above, and only draw the required objects. Labor demand L1 Quantity of labor (employment)Explanation / Answer
As the price of the product has increased it would lead to increase in production for more supply and more labours would be needed. Hence, the demand curve would shift rightwards.
2) equilibrium price will raise high. Also the employment would increase.