Exhibit 4-2 Supply and demand curves
-The market shown in Exhibit 4-2 is initially in equilibrium at point E₁. Union negotiations for workers producing good X result in a wage increase. Other things being equal, which of the following is the new equilibrium after this wage increase is in effect?

Question

Exhibit 4-2 Supply and demand curves

-The market shown in Exhibit 4-2 is initially in equilibrium at point E₁. Union negotiations for workers producing good X result in a wage increase. Other things being equal, which of the following is the new equilibrium after this wage increase is in effect?

Quizplus · Accepted Answer

After the wage increase, the cost of production for good X increases, causing the supply curve to shift leftward from S1 to S2. This results in a new equilibrium point at ES2U2B14S2U2B0, where the quantity demanded decreases to Q2 and the price increases to P2.

Exhibit 4-2 Supply and Demand Curves ​

Exhibit 4-2 Supply and Demand Curves