Question

How do various events affect the equilibrium wage and employment of labor?

Answer 1

Answer : As equilibrium in the labour market occurs where the demand curve for labour and supply curve of labour intersect with each other. There are various factors which affect equilibrium in the labour market as follows:

• Increase in the demand of labour will cause the equilibrium Wage and equilibrium employment to increase: If the productivity of workers increased and marginal revenue og product also increasing causing labour demand to shift to the right this result in equiliburm wages increases.
• Increase in the labour supply will causes equilibrium wages to fall but equilibrium level of employment rises.