The following figure shows the labor demand curve, LD₁, and labor supply curve, LS₁, in a market. A month later, the labor demand curve shifts to LD₂.

-Refer to the figure above.If there is downward wage rigidity in the market,what will be the wage rate,everything else remaining unchanged?

Question

The following figure shows the labor demand curve, LD₁, and labor supply curve, LS₁, in a market. A month later, the labor demand curve shifts to LD₂.
 
-Refer to the figure above.If there is downward wage rigidity in the market,what will be the wage rate,everything else remaining unchanged?

Quizplus · Accepted Answer

Downward wage rigidity implies that wages cannot decrease below a certain level. If the current wage is $25 and there is downward rigidity, the wage will remain at $25.

The Following Figure Shows the Labor Demand Curve, LD₁, and Labor