The labour market in the diagram below begins in equilibrium with a real wage of $10 and quantity employed of 1000. FIGURE 30-1
-Refer to Figure 30-1.The economy begins with D₀ and S₀.Suppose there is a positive shock to the economy,which shifts the demand for labour curve to D₂,and the wage rate rises to $11.The result is

Question

The labour market in the diagram below begins in equilibrium with a real wage of $10 and quantity employed of 1000.

FIGURE 30-1
-Refer to Figure 30-1.The economy begins with D₀ and S₀.Suppose there is a positive shock to the economy,which shifts the demand for labour curve to D₂,and the wage rate rises to $11.The result is

Quizplus · Accepted Answer

With the positive shock, the demand for labour shifts to the right from D₀ to D₂. As a result, the equilibrium real wage rate rises from $10 to $11, and the equilibrium quantity of labour employed increases from 1000 to 1200. At the new equilibrium, the quantity of labour supplied is less than the quantity demanded, resulting in excess demand for labour of 200 workers. Therefore, the correct answer is E, excess demand for labour of 200 workers.

The Labour Market in the Diagram Below Begins in Equilibrium