Thursday
July 31, 2014

Homework Help: More Economics

Posted by Bryan on Saturday, June 16, 2007 at 6:28pm.

I have an lazy instructor using test bank questions unrelated to my text and need some help. The second question is "anything that makes the efficiency wage rise relative to the market-clearing wage will...A) increase both the quantity demanded and the quantity supplied of labor. B)decrease both the quantity demanded and quantity supplied of labor. C)increase the quantity demanded and decrease the quantity supplied of labor. D)decrease the quantity demanded and increase the quantity supplied of labor.

Now the might sound straight-forward but my textbook does not explain efficiency wage that way. It states efficiency wages = above-equilibrium wages paid by firms to increase worker productivity. Nothing about supply & demand. HELP before I jump from the roof!

Unemployment from a Wage above the Equilibrium Level = In this labor market, the wage at which supply and demand balance is at equilibrium. At this equilibrium wage, the quantity of labor supplied and the quantity of labor demanded both equal the equilibrium quantity. By contrast, if the wage is forced to remain above
the equilibrium level, perhaps because of a minimum-wage law, the quantity of labor supplied rises and the quantity of labor demanded falls. The resulting surplus of labor represents unemployment.

Suggest answer D.

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