Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market.
-Refer to figure 5.3. Which of the following is a possible outcome of a fall in the wage rate from $6 to $4?
A)There will be an increase in both, the supply of and the demand for labor.
B)There will be a fall in the supply of labor and an increase in the demand for labor.
C)There will be a fall in the demand for labor and an increase in the supply of labor.
D)There will be a shift in the equilibrium point.
E)There will be a fall in both the supply of and the demand for labor.

Question

​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. 
-Refer to figure 5.3. Which of the following is a possible outcome of a fall in the wage rate from $6 to $4?​
A)​There will be an increase in both, the supply of and the demand for labor. 
B)​There will be a fall in the supply of labor and an increase in the demand for labor. 
C)​There will be a fall in the demand for labor and an increase in the supply of labor. 
D)​There will be a shift in the equilibrium point. 
E)​There will be a fall in both the supply of and the demand for labor.

Quizplus · Accepted Answer

A fall in the wage rate from $6 to $4 will lead to a decrease in the quantity of labor supplied. This is because workers will find it less attractive to work at the lower wage rate, and therefore reduce the amount of time they are willing to work. At the same time, the decrease in wage rate will make it more profitable for firms to hire labor, leading to an increase in the demand for labor. Therefore, the outcome of the fall in the wage rate will be a fall in the supply of labor and an increase in the demand for labor.

​Figure 53

Figure 53