Consider a labor market in equilibrium. If both demand curve and supply curve of labor shift to the right, then the wage rate in the market will ________.

Question

Quizplus · Accepted Answer

When both demand and supply curves for labor shift to the right, the equilibrium wage rate can either increase, decrease or remain unchanged, depending on the relative shifts of the two curves. If the new supply curve shifts relatively more to the right than the demand curve, the equilibrium wage rate will decrease. If the new demand curve shifts relatively more to the right than the supply curve, the equilibrium wage rate will increase. If both curves shift by the same amount, there will be no change in the equilibrium wage rate.

Consider a Labor Market in Equilibrium