Question

Assume initial full employment at W1 and N1. How might a technological change that increased productivity influence the labor market equilibrium?
full employment could move to 2W and N2
full employment will remain unchanged at 1W and N1​

Answer 1

Technology will replace the workers and the new equilibrium will be at N2'.

Answer: Option 3.

Explanation:

Equilibrium in a perfectly competitive labor market happens when the supply of labor is equal to the demand of labor. As market compensation decline beneath the harmony rate, the interest for work is more noteworthy than the stock, making a deficiency of laborers.

The labor market is in balance when supply approaches request; E* laborers are utilized at a compensation of w*. In harmony, all people who are searching for work at the going compensation can get a new line of work. The triangle P gives the maker excess; the triangle Q gives the specialist overflow.