Effects of Increased Labor Demand

Steps:

• Identify the change: An increase in labor demand shifts the demand curve rightward.
• Analyze wage impact: Higher demand raises equilibrium wage to clear the market.
• Analyze employment impact: More workers are hired at the new equilibrium, increasing quantity employed.
• Analyze supply response: Firms hire more, extending labor supply along the supply curve.

Why D is correct:

• Law of demand: Rightward shift increases both price (wage) and quantity (employment), extending supply.

Why the others are wrong:

• A: Wrong direction for wage and employment; supply contracts, not extends.
• B: Wage decreases contradict demand increase; supply contracts incorrectly.
• C: Employment decreases oppose demand rise; supply contracts wrongly.

Final answer: D