Question

State whether the labor supply curve, labor demand curve or neither of the two will shift in the current scenario when the government has mandated workplace closures. If there is a shift, is the shift to the left or to the right? Illustrate your answer with a figure and show what happens to the full-employment level of employment following the shifts, if any. Label the axes and curves clearly

Answer 1

Labor markets have curves of demand and supply, much as the consumer markets. The rule of demand works this way in labor markets: a higher pay leads to a decrease in the quantity of labor demanded by employers, whereas a lower salary or wage leads to an rise in the quantity of labour. The supply rule often operates in labor markets: a higher labor price contributes to a higher labor supply quantity; a lower price contributes to a lower supply quantity.

Many factors influence labor supply, including wage rates, migration trends, changes in income tax, pension reform, trade unions, government labor laws, increases in retirement age, and female labor force participation.

Real money supply has no effect on the Labour market. The change in money supply will create disequilibrium in the money market. There will be no effect on the level of employment and the real wage.

Real money supply does not have an impact on the labor market. Changing the supply of money would create uncertainty in the money market. There will be no impact on job rates and real wages.

Please don't forget to like the solution. Thank you.