Increase/decrease Suppose there is an increase in the labor force participation rate. You would expect the equilibrium wage to [select] and the equilibrium quantity of labor employed to [select].(Note: The image shows a question with dropdown selections for the expected effects on equilibrium wage and labor quantity due to a change in labor force participation.)

Answered: Suppose there is an increase in the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Increase/decrease

Suppose there is an increase in the labor force participation rate. You would expect the equilibrium wage to [select] and the equilibrium quantity of labor employed to [select].

(Note: The image shows a question with dropdown selections for the expected effects on equilibrium wage and labor quantity due to a change in labor force participation.)

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Step 1

The equilibrium level of wage and quantity of worker or labor is determined by the point of intersection of the labor demand and labor supply curve. If the participation rate of labor force increases, the number of labor increase in the labor force and this will increase the supply of worker in the market. As a result, the supply curve of worker shift towards right or downward as a result the new equilibrium wages decreases and the equilibrium number of worker increases at new equilibrium where new supply curve intersects the original demand curve as the firm will employ more worker at lower wage rate.

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