The labour market is in equilibrium whenever

Question

Quizplus · Accepted Answer

Equilibrium in the labour market occurs when the quantity of labour demanded is equal to the quantity of labour supplied, which is represented by the intersection of the demand and supply curves for labour. This is irrespective of whether the nominal wage rate is increasing, decreasing, or not changing, as the nominal wage rate is just the price of labour and can fluctuate in response to changes in demand and supply of labour. The real wage rate, which is the nominal wage rate adjusted for inflation, may increase or decrease depending on the direction of changes in the nominal wage rate and the general price level. However, the key determinant of equilibrium in the labour market is the equality of labour demand and supply.

The Labour Market Is in Equilibrium Whenever