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Increased Labor Demand and the Equilibrium Wage - Essay Example

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Labor is one of the three most important factors of production (Mankiw 2004, p. 392). The price of a given type of labor, or the wage earned thereby, is dependent on an abundance or dearth in both its supply and demand (Mankiw, 2004, p. 400). When a particular, competitive labor market is in a state of equilibrium, supply and demand are balanced, and the equilibrium wage for a laborer in that market is fixed and equal to the value of that wage-earner's contribution to the employer's profit revenue (Mankiw, 2004, p…
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Increased Labor Demand and the Equilibrium Wage

Download file to see previous pages... For example, in the given scenario, that the September 11th attacks on the United States altered the perceived need for a particular type of labor, to wit, security personnel, the relevant market shift is an increase in demand. Once the demand has increased, supply and demand are no longer balanced, and the market equilibrium is disrupted. To reset this balance, wage and the value of marginal production must also increase to the point where stability is again achieved. Simply put, and assuming that supply remains unchanged, the greater the demand for a particular type of labor, the greater the marginal value of a particular worker's product, and, thus, the greater must that worker's wage be to achieve market equilibrium.
It is logical that the September 11th attacks created a greater demand for security personnel. Society became much more concerned with creating safe environments at locales such as airports, in airplanes, at events where large amounts of people congregate, and at globally-recognized structures. ...Download file to see next pagesRead More
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