The first 3 columns of the following table show data for a representative firm in an industry.The last 3 columns show the market demand and supply for the type of labour employed by this firm.

-What happens if the demand for labour increases more than does the supply of labour?
A)Wage rates will increase.
B)Wage rates will decrease.
C)The effect on wage rates is indeterminate.
D)The quantity of hours worked will decline.

Question

The first 3 columns of the following table show data for a representative firm in an industry.The last 3 columns show the market demand and supply for the type of labour employed by this firm.
 
-What happens if the demand for labour increases more than does the supply of labour?
A)Wage rates will increase. 
B)Wage rates will decrease. 
C)The effect on wage rates is indeterminate. 
D)The quantity of hours worked will decline.

Quizplus · Accepted Answer

When demand for labor increases more than the supply of labor, there is a shortage of labor, and firms will have to pay higher wages to attract workers. Therefore, wage rates will increase.

The First 3 Columns of the Following Table Show Data