Use the figure to answer the following question(s). Figure 12-2 If an unanticipated increase in demand in Figure 12-2 shifts the demand for accountants from D ₁ to D ₂, how will the higher level of demand influence the wages of accountants in the short run and the long run? A) In the short run, wages will increase to W ₂, but the wage increase will be smaller in the long run. B) In the short run, wages will be less than W ₂, but in the long run, they will rise to W ₂. C) In the short run, wages will increase to W ₂, and in the long run, they will be even higher than W ₂. D) Employment will increase, but the higher level of demand will not alter the wages of accountants.

Question

Quizplus · Accepted Answer

In the short run, the increase in demand will lead to a higher wage rate (W ₂) due to the limited supply of accountants. However, as the demand shock was unanticipated, firms will need time to adjust their hiring and training practices in order to produce more accountants. This means that in the long run, more people will be willing to become accountants, and the supply of accountants will increase, driving down the wage rate. Therefore, the wage increase in the long run will be smaller than in the short run.

Use the Figure to Answer the Following Question(s)