In a classical labor market, demand is downward sloping because A. higher employment supplied would lead to lower real wages. B. higher real wages lead to more labor supplied. C. fewer workers means real wages will rise. D. lower real wages make it more profitable to employ more workers. A proportionate increase in the price level and the nominal wage in the classical model A. increase labor supply. B. decrease labor supply. C. leave labor supply unchanged. D. affect labor supply but the direction of the effect is uncertain.
Added by Priscilla M.
Close
Step 1
Step 1: Identify what determines labor demand in the classical model: firms hire workers until the real wage w = W/P equals the marginal product of labor (MPL); because MPL declines as employment rises, the quantity of labor demanded falls when the real wage rises. Show more…
Show all steps
Your feedback will help us improve your experience
Bryan Kim and 50 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
Assume that $(a)$ the price level is flexible upward but not downward and $(b)$ the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run? a. An increase in aggregate demand. b. A decrease in aggregate supply, with no change in aggregate demand. c. Equal increases in aggregate demand and aggregate supply. d. A decrease in aggregate demand. e. An increase in aggregate demand that exceeds an increase in aggregate supply.
Md.Daniyal A.
Assume that (a) the price level is flexible upward but not downward, and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run? a. An increase in aggregate demand. b. A decrease in aggregate supply, with no change in aggregate demand. c. Equal increases in aggregate demand and aggregate supply. d. A decrease in aggregate demand.
Andrew D.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Watch the video solution with this free unlock.
EMAIL
PASSWORD