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O Levels Economics (2281)•2281/11/M/J/21
Question 11 from 2281/11/M/J/21

Explanation

Wage Negotiation Reduces Employment in Labor Market

Steps:

  • Locate original equilibrium employment at point X on the quantity axis.
  • After negotiation, new wage W exceeds original, so employment falls to the quantity demanded at W on the demand curve.
  • Measure change as horizontal distance between original and new employment levels.
  • This distance is segment RS, showing employment reduction.

Why C is correct:

  • RS equals the difference in employment quantities, per labor demand curve at higher wage W.

Why the others are wrong:

  • A: OR measures original employment, not the change.
  • B: OT measures new employment level, not the difference.
  • D: RT combines unrelated segments, ignoring demand curve shift.

Final answer: C

Topic: Trade unions

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