Assume that the graph below describes the current labor market for nurses in a mid-sized city and that the labor market is perfectly competitive. If supply shifts from S₀ to S₁and demand shifts from D₀ to D₁, then

Question

Quizplus · Accepted Answer

When both the supply and demand curves shift rightward, the equilibrium wage will increase. In this case, we can see that the new equilibrium point is where the wage is $60. At this wage, the quantity of nurses supplied and demanded are equal, meaning there is no excess supply or shortage. Therefore, to avoid a nursing shortage, the wage must increase to $60, making choice A the correct answer.

Assume That the Graph Below Describes the Current Labor Market