Multiple Choice Question (1 Viewer)

[michaeljennings]

What would happen when the demand for labour exceeds the supply of labour in a certain industry
a) The wage rate will fall and the level of employment will increase
b) The wage rate will rise and the level of employment will decrease
c) The wage rate will rise and the level of employment will increase
d) The wage rate will fall and the level of employment will decreased

So far i understand that the wage rate will rise, but i dont understand how the level of employment would decrease as the answer is B

Could someone explain this to me

 

[tambam]

What would happen when the demand for labour exceeds the supply of labour in a certain industry
a) The wage rate will fall and the level of employment will increase
b) The wage rate will rise and the level of employment will decrease
c) The wage rate will rise and the level of employment will increase
d) The wage rate will fall and the level of employment will decreased

So far i understand that the wage rate will rise, but i dont understand how the level of employment would decrease as the answer is B

Could someone explain this to me

The level of employment decreases means they're hiring less people, because people are unavailable. (does not mean people are getting unemployed/fired)

For example, if before they were hiring 3 people a day,there were people available for the job so they employed them.
But now, they still need to hire 3 people a day, but there's noone available, so they hire 0 people a day, so then they're employment level decreases.

Now give me rep or die.

 

[michaeljennings]

love ya bro!

 

[tambam]

love ya bro!

please don't be creepy

 

[Bobbo1]

hmmm... still confused on this one... if more is being demanded then more people will begin working since they can enjoy a higher wage rage right?

 

[haiderr]

its a tricky question indeed, but here is how i see it:

there are two parts to this question: a short term and long term aspect.

short term: since demand for labour exceeds supply for labour, wage rates will rise (proven by simple supply/demand curve).

long term: since wages have now gone up, demand for labour will contract and come back to equilibrium..remember, if prices (in this case wages) go up, then demand for g+s (in this case employees or labour) will go down. hence, the level of employment will fall.

this is a tricky question so try asking your teacher what the correct explanation is goodluck!