Demonstrate and illustrate graphically why the most desirable technique for raising wage rates is to increase the demand for labor from the union's point of view and, also explain the main limitation of unions.

The labor market involves the interaction between workers who supply labor and firms that demand labor. The supply of labor represents the number of workers willing to work at a given wage rate, while the demand for labor represents the number of workers that firms want to hire at a given wage rate. In a competitive labor market without a union, wages are determined by the intersection of labor demand and labor supply.

A union is an organization formed by workers to protect their rights and improve their working conditions. When a union is involved in the labor market, it has the power to negotiate wages on behalf of its members. Unions generally aim to increase wage rates and improve working conditions for their members. In this context, let's consider that the union is successful in raising the wage rate above the competitive market equilibrium.

To illustrate why increasing the demand for labor is the most desirable technique for raising wage rates from the union's point of view, let's draw a graph of the labor market. The horizontal axis represents the quantity of labor (number of workers), and the vertical axis represents the wage rate. The labor supply curve (S) is upward sloping, indicating that more workers are willing to work at higher wage rates. The labor demand curve (D) is downward sloping, indicating that firms want to hire fewer workers at higher wage rates. Now, let's introduce the union's desired wage rate (Wu) above the market equilibrium wage rate (We). At this higher wage rate, there is a labor surplus, as more workers are willing to work than firms want to hire.

If the union can increase the demand for labor in the market, the labor demand curve will shift to the right (D'). This increased labor demand will result in a new market equilibrium with a higher wage rate (Wu') and more workers employed. In this scenario, the union achieves its goal of raising wage rates while also avoiding unemployment among its members, making it the most desirable technique from the union's point of view.

The main limitation of unions in raising wage rates is their limited ability to influence the demand for labor. Unions can negotiate higher wages for their members and, in some cases, improve working conditions, but they have limited power in changing the overall structure of the labor market, which is affected by factors such as the economy, technological changes, and global competition. These factors often limit the extent to which unions can raise wage rates in the long term, even when they are successful in increasing labor demand in the short term. Overall, unions can play an essential role in advocating for workers’ rights and improving working conditions, but their ability to permanently raise wages may be limited by broader economic forces.