Labor
Explanation of Solution
Demand and supply of labor are determined by many factors. The demand could be increased due to an increase in the productivity of labor, which in turn increases the marginal revenue product of labor. This would shift the demand curve. However, when there is higher productivity, it might also lead to saving of labor. Ultimately, the demand for labor declines. There is also an increase in the population, and this would demand more job opportunities. The increase in wages might reduce the demand for labor and hence the employment. It is also possible that the increase in population demands more employment opportunities and higher demand for labor. This is because the demand and supply of labor are not only influenced by the nominal wages. There are many other factors that may change in the economy over a period of 10 years.
Demand for labor: Demand for labor is defined as the quantity of labor demanded by the firms at a particular wage during a period of time.
Supply of labor: Supply of labor is defined as the number of laborers who are willing to work at a particular wage during a period of time.
Long run: Long run is defined as the period in which production can be increased by changing all the input factors.
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