Refer to the above graph,which shows the supply and demand for unionized manufacturing workers.The initial equilibrium point is point 1.The wages paid in comparable nonunion occupations increase significantly,while at the same time the price of manufactured goods increases.Which point would represent the new equilibrium?
A) 2
B) 3
C) 4
D) 5

Question

Refer to the above graph,which shows the supply and demand for unionized manufacturing workers.The initial equilibrium point is point 1.The wages paid in comparable nonunion occupations increase significantly,while at the same time the price of manufactured goods increases.Which point would represent the new equilibrium?
A) 2 
B) 3 
C) 4 
D) 5

Quizplus · Accepted Answer

B is the new equilibrium point where the supply curve intersects with the new, higher demand curve. The increase in wages for comparable nonunion occupations will shift the demand curve for unionized workers to the right (from D1 to D2), causing a shortage at the original equilibrium wage rate (point 1). As a result, employers will have to increase wages to attract more unionized workers, which in turn will increase the quantity of workers supplied. This process will continue until the new equilibrium point is reached at point 3, which represents a higher wage rate and higher quantity of workers employed compared to the original equilibrium point. The increase in the price of manufactured goods will not directly affect the equilibrium point for unionized manufacturing workers.

Refer to the Above Graph,which Shows the Supply and Demand