Suppose we wish to examine the determinants of the equilibrium real wage and equilibrium level of employment (N).In a graph with the real wage on the vertical axis,and the level of employment on the horizontal axis,the wage-setting relation will now be

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The wage-setting relation represents the relationship between the level of employment and the real wage at which workers are willing to supply their labor. As employment increases, workers are able to negotiate higher real wages due to increased demand for their labor, making the wage-setting relation an upward sloping line.

Suppose We Wish to Examine the Determinants of the Equilibrium