What happens to the market clearing wage and equilibrium employment if the demand for labor increases?...

What happens to the market clearing wage and equilibrium employment if the demand for labor increases?
What happens to the market clearing wage and equilibrium employment if the supply of labor increases?
What happens to the market clearing wage and equilibrium employment if the demand and supply of labor increases?
What happens to the equilibrium wage and equilibrium employment of a given firm if the demand for product increases?
What happens to the equilibrium wage and equilibrium employment of a given firm if the there is a general increase in non-monetary benefits offered by all firms?

Expert Solution

Answer : 1) When labor demand increase then the labor demand curve shift to rightward. As a result, at new equilibrium the market clearing wage rate rise and equilibrium employment increase.

2) When labor supply increase then the labor supply curve shift to rightward. As a result, at new equilibrium the market clearing wage rate fall and equilibrium employment increase.

3) When both labor demand and labor supply increase then both the labor demand curve and labor supply curve shift to rightward. As a result, at new equilibrium the market clearing wage rate will remain unchanged but the equilibrium employment increase.

4) If the demand of a firm's product increase then the firm will increase the production level. To increase the production level more labors will be required which will increase the labor demand. As result, the labor demand curve shift to rightward and at new equilibrium the wage rate rise and equilibrium employment increase.

5) If the offer of non-monetary benefits increase then the labor supply increase which shift the labor supply curve to rightward. As a result, at new equilibrium the wage rate fall and equilibrium employment increase.

Rahul Sunny answered 1 year ago

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