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Supply and Demand Model of the Labor Market
In the supply and demand model for the labor market, the price is the "daily wage" (denoted by W) and the quantity is the number of workers (denoted by E).
A. Draw a graph in the space below for the S and D of the labor market. Label the vertical axis and the horizontal axis. Label the supply curve and the demand curve. Label the equilibrium wage on the vertical axis and the equilibrium level of employment on the horizontal axis.
B. Use the SAME graph that you drew for #3 above. Now, assume that there is an INCREASE IN SUPPLY. SHOW this increase in supply on the graph that you have already drawn. Label any new curves. If there is a change in the equilibrium wage, label the new value. If there is a change in the equilibrium level of employment, label the new value. EXPLAIN IN WORDS the impact of this supply increase on the equilibrium wage and employment levels.
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