The figure below shows the relationship between an economy's output and employment.

-Refer to the figure above.Suppose the economy is currently operating on the production function F₂ and E₂ is the level of employment in the country.If the demand curve for labor shifts to the left,________.
A) employment will decrease from E₂ to E₁
B) employment will increase from E₂ to E₃
C) employment will remain unchanged at E₁
D) output will increase from Y₂ to Y₃

Question

The figure below shows the relationship between an economy's output and employment.
 
-Refer to the figure above.Suppose the economy is currently operating on the production function F₂ and E₂ is the level of employment in the country.If the demand curve for labor shifts to the left,________.
A) employment will decrease from E₂ to E₁ 
B) employment will increase from E₂ to E₃ 
C) employment will remain unchanged at E₁ 
D) output will increase from Y₂ to Y₃

Quizplus · Accepted Answer

If the demand curve for labor shifts to the left, the equilibrium employment level will decrease from E₂ to E₁, as seen in the figure. This is because a leftward shift in the demand for labor curve means that firms are willing to hire fewer workers at each wage level. As a result, the equilibrium wage rate will fall, and employment will decline from E₂ to E₁. Output will also fall from Y₂ to Y₁ because there are fewer workers available to produce goods and services.

The Figure Below Shows the Relationship Between an Economy's Output