Suppose there are 100 firms in a market and all are identical. Firm A will hire 20 workers when the wage rate is $10, 25 workers when the wage rate is $9, and 30 workers when the wage rate is $8. The equilibrium wage rate for a number of years has been $9. If the wage rate falls to $8, we know that

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At a wage rate of $9, Firm A hires 25 workers. If all 100 firms are identical, then at a wage rate of $9, the total number of workers hired in the market would be 25 workers per firm * 100 firms = 2,500 workers. When the wage rate falls to $8, Firm A hires 30 workers. Assuming all firms respond similarly, the total market demand for workers would increase to 30 workers per firm * 100 firms = 3,000 workers.

Suppose There Are 100 Firms in a Market and All