Excess Demand Drives Wages Up

Steps:

• Identify factors affecting wages: supply and demand for labor determine equilibrium wage levels.
• Excess demand occurs when labor demand exceeds supply at current wages.
• Employers compete for scarce workers, bidding up wages to attract talent.
• Equilibrium restores when higher wages reduce demand or increase supply.

Why C is correct:

• Law of supply and demand: excess demand for labor pushes wages upward until market clears, as firms offer higher pay to secure workers.

Why the others are wrong:

• A: Weekly pay frequency affects cash flow, not underlying wage rates driven by market forces.
• B: Less training implies lower skills, reducing labor demand and keeping wages low.
• D: Less danger lowers risk premiums (compensating differentials), decreasing wages for safer jobs.

Final answer: C