I learned that when there is a change in circumstances, I\'m never supposed to s

Question

I learned that when there is a change in circumstances, I'm never supposed to shift both the supply and demand curves. I must only shift one of them.

But I came across this question: Would an increase in the wage rate paid to workers cause the market demand curve for labor to shift?

I know that in such a case the supply curve would shift to the left, because producers would lower their demand for workers. Yet surely the increased wages will draw more workers to the market, and therefore the supply of workers in the market should shift to the right. I therefore have a situation where I would like to shift both curves, but am reluctant to do so because of the aforementioned rule. Please help. Thank you.

Explanation / Answer

This question is asking you to know the difference between a shift in the demand curve and a movement along the demand curve. A change in wages is a movement along the demand curve. The demand curve of labor represents the amount of labor demanded by employers for each wage that could potentially be offered. Changes in wage are simply movements along this curve,not shifts. The correct answer is "no." The supply curve for labor represents the amount of labor willing to be provided at each wage. It also does not shift as a response to changes in wages. Neither curves shift. :) Also, your rule is a good one but has exceptions. There are some times when the demand and supply curves shift. For example, if there is a new expectation for the price of wheat to increase in the future, both the demand and supply curve for wheat will shift.

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.