In a competitive labor market, if the supply of labor decreases, how will the equilibrium wage...

Question:

In a competitive labor market, if the supply of labor decreases, how will the equilibrium wage rate and employment change?

a) Wage Rate: Increase; Employment: Increase

b) Wage Rate: Increase; Employment: Decrease

c) Wage Rate: Decrease; Employment: Increase

d) Wage Rate: Decrease; Employment: Decrease

e) Wage Rate: No change; Employment: Decrease

Labor Economics:

Labor economics focuses on the market for labor. The market for labor is unique because workers are trying to maximize utility and not income. Income is used as a way to get funds to consume goods which increases utility.

Answer and Explanation: 1

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Answer: B

In a competitive market, decrease in the supply of labor shifts the labor supply curve left. This causes the new supply curve to intersect...

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Supply in Economics: Definition & Factors

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Chapter 3 / Lesson 8
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Learn the definition of "supply" in economics. Know what supply is, the concepts of supply, factors affecting supply, and changes in supply with examples.


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