Question

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, the equilibrium wage in the labor market for computer programmers
A. increased.
B. decreased.
C. did not change.
D. It is not possible to determine the equilibrium wage.

Answer 1

Answer:

The correct answer is A. increased.

Explanation:

The equilibrium salary is the point of intersection between the labor supply curve and the labor demand.

At Wo, the number of hours offered by job offers is exactly equal to the number of hours companies wish to use. The Wo salary and the level of employment Qo is the only continuation of salary and employment with which the market empties.

If the salary were Wes there would be an excess supply or surplus of work which would lower the salary the salary to Wo: if the salary were Wed there would be an excess or shortage of demand and the salary would be raised to Wo, this means that having excess companies need to hire workers originating a salary increase to Wo. The inverse would be the point where the surplus of job supply causes wages to fall Wo.