The market for engineers is initially in equilibrium.The demand curve for engineers shifts up.Assume the naive cobweb model holds such that in the first period,the labor supply is fixed,in the next period,wages are fixed,and so on.In period three,how will the wage rate compare to the new long run level?

Question

Quizplus · Accepted Answer

In the naive cobweb model, the wage rate will adjust gradually towards its long run level as the market reaches equilibrium. However, since the demand curve for engineers has already shifted up in period one, the wage rate will be lower than the long run level in period three as it has not yet fully adjusted to the new equilibrium. Hence, the best choice is A).

The Market for Engineers Is Initially in Equilibrium