Figure 9.1
The Effects of an Employer-Specific Labor Demand Increase when Labor is Perfectly Mobile(a) (b) (c)

-According to Figure 9.1 which of the panels depicts,when producer 1 increases wages to attract workers from producer 2,what happens to total labor in the market?

Question

Figure 9.1
The Effects of an Employer-Specific Labor Demand Increase when Labor is Perfectly Mobile(a) (b) (c)
 
-According to Figure 9.1 which of the panels depicts,when producer 1 increases wages to attract workers from producer 2,what happens to total labor in the market?

Quizplus · Accepted Answer

In panel (a), when producer 1 increases wages to attract workers from producer 2, producer 1 increases labor and producer 2 decreases labor, but the total labor used in the market increases. This happens because labor is perfectly mobile, meaning workers can easily move from one producer to another without any restrictions. Therefore, when one producer increases wages, it attracts workers from the other producer. As a result, total labor in the market increases. Panels (b) and (c) show the same phenomenon but with different initial levels of total labor in the market.

Figure 9.1 The Effects of an Employer-Specific Labor Demand Increase When Labor