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Chapter 4: Q2 (page 103)

In the labor market, what causes a movement along the supply curve? What causes a shift in the supply curve?

Short Answer

Expert verified

Change in wages or salaries leads to movement along the labor supply curve. Change in factors other than wages or salaries leads to shift of the labor supply curve.

Step by step solution

01

Labor Supply Concept 

Labor supply is done by workers. Primary factor effecting quantity of labor supplied is wages or salaries. Labour supply is directly related to wages, higher wages imply more labour supplied & lower wages imply less labor supplied.

02

Detailed Explanation - Movement & Shift 

Labour supply curve is an upward sloping curve, showing quantity of labor supplied at various wages or salaries level.

Change in wages or salaries causes increase (expansion) or decrease (contraction) in 'quantity supplied' of labor, which leads to movement along the curve.

Change in any factor other than wages or salaries (for eg - workers preferences towards work) causes increase or decrease in 'supply' of labor, which leads to shift of the curve.

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Most popular questions from this chapter

Whether the product market or the labor market, what happens to the equilibrium price and quantity for each of the four possibilities: increase in demand, decrease in demand, increase in supply, and decrease in

supply.

Whether the product market or the labor market, what happens to the equilibrium price and quantity for each of the four possibilities: increase in demand, decrease in demand, increase in supply, and decrease in supply.

If the government imposed a federal interest rate ceiling of 20% on all loans, who would gain and who would lose?

Identify each of the following as involving either demand or supply. Draw a circular flow diagram and label the flows A through F. (Some choices can be on both sides of the goods market.)

a. Households in the labor market

b. Firms in the goods market

c. Firms in the financial market

d. Households in the goods market

e. Firms in the labor market

f. Households in the financial market

Select the correct answer. A price floor will usually shift:

a. demand

b. supply

c. both

d. neither

Illustrate your answer with a diagram.
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