Chapter Study Outline3.1 The Neoclassical Labor-Demand Model Show
3.2 The Constraints
3.3 Perfect Competition and Monopoly Power
3.4 Monopsony
What happens to real wages when there is an increase in the demand curve?An increase in product demand will shift the demand for labor curve to the right, causing both wages and employment to increase. c. Increased wages in other occupations will render them relatively more attractive than they were before and cause the supply curve to the occupation in question to shift to the left.
What happens when demand for labor increases?The firm's demand for labor is a derived demand; it is derived from the demand for the firm's output. If demand for the firm's output increases, the firm will demand more labor and will hire more workers. If demand for the firm's output falls, the firm will demand less labor and will reduce its work force.
What happens to wages when labor supply increases?A wage increase raises the quantity of labor supplied through the substitution effect, but it reduces the quantity supplied through the income effect.
What happens when market wage increases?Wage increases cause inflation because the cost of producing goods and services goes up as companies pay their employees more. To make up for the increase in cost, companies must charge more for their goods and services to maintain the same level of profitability.
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