FIGURE 14-6
-Refer to Figure 14-6.The market begins in equilibrium with the curves labelled Demand and Supply.If a labour union negotiates the wage to W₂ in an otherwise competitive labour market,

Question

FIGURE 14-6 -Refer to Figure 14-6.The market begins in equilibrium with the curves labelled Demand and Supply.If a labour union negotiates the wage to W₂ in an otherwise competitive labour market,

Quizplus · Accepted Answer

The negotiated wage of WS1U1B12S1U1B0 exceeds the original equilibrium wage of WS0U0B0, causing a surplus of labour. This surplus leads to employers reducing the quantity of labour they hire to LS1U1B11S1U1B0. The demand for labour does not shift, but rather the quantity demanded is reduced due to the higher wage. The equilibrium occurs at the intersection of the new supply curve (S1U1B11) and the original demand curve (D).

FIGURE 14-6 -Refer to Figure 14-6.The Market Begins in Equilibrium with the with the Curves