refer to the following diagram. Wages in both the union and nonunion sectors are initially $10. The union then negotiates a wage rate of $12. The post-negotiation nonunion wage is not yet known.
-The product market effect would be modeled by shifting the:

Question

Quizplus · Accepted Answer

When the union negotiates a higher wage rate, the nonunion sector's demand for labor increases, as workers now have a better alternative. This would shift the nonunion demand curve to the right. As a result, the measured union wage advantage would decrease. Therefore, the product market effect would be modeled by shifting the nonunion demand curve to the right, reducing the measured union wage advantage.

Refer to the Following Diagram