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Chapter 9: Labor Demand (page 327)

What is the inverse relationship in the demand for labor curve?

Short Answer

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high wages equal to low employment levels

Step by step solution

01

Labor demand 

When wages are lower, labor becomes relatively cheaper than capital. It can be said that when wage rates start decreasing, a substitution effect might occur that could lead to an expansion in the labor market. Higher wages lead to a contraction of demand for labor whereas lower wages lead to an expansion of demand for labor.

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