Figure 18-3

-Refer to Figure 18-3.If the relevant labour supply curve is S₂ and the current wage is W₁
,what do we know about the condition of this labour market

Question

Figure 18-3
 
-Refer to Figure 18-3.If the relevant labour supply curve is S₂ and the current wage is W₁
,what do we know about the condition of this labour market

Quizplus · Accepted Answer

In this scenario, the supply of labour (S₂) exceeds the demand for labour (D₁) at the current wage rate (W₁). This creates a surplus of labour, which means that there are more workers willing to work at this wage rate than there are employment opportunities available. To restore equilibrium in the market, the wage rate would have to be lowered or the demand for labour would have to increase (such as through economic growth or increased consumer demand). Option C is not correct as an increase in minimum wage would further increase the surplus of labour. Option D is not correct as the demand curve shifting downwards would only exacerbate the surplus of labour.

Figure 18-3 -Refer to Figure 18-3.If the Relevant Labour Supply Curve Is