The labour market in the diagram below begins in equilibrium with a real wage of $10 and quantity employed of 1000.
FIGURE 30-1
-Refer to Figure 30-1.The economy begins with D0 and S0.Suppose there is a positive shock to the economy,which shifts the demand for labour curve to D2,and the wage rate rises to $11.The result is

Question

The labour market in the diagram below begins in equilibrium with a real wage of $10 and quantity employed of 1000.
  FIGURE 30-1
-Refer to Figure 30-1.The economy begins with D0 and S0.Suppose there is a positive shock to the economy,which shifts the demand for labour curve to D2,and the wage rate rises to $11.The result is

Quizplus · Accepted Answer

A positive shock to the economy shifts the demand for labour curve to the right from D0 to D2, resulting in an increase in the equilibrium wage rate from $10 to $11 and an increase in the quantity of labour employed from 1000 to 1200. Since the new equilibrium quantity of labour demanded is greater than the initial equilibrium quantity of labour supplied, there is an excess demand for labour of 200 workers. Therefore, the correct answer is (E) excess demand for labour of 200 workers.

The Labour Market in the Diagram Below Begins in Equilibrium