Question

Suppose the market for coffee shop workers is currently in equilibrium. If the number of coffee shops increases, which of the following are consequences? Select all that apply: equilibrium wage will fall equilibrium wage will rise equilibrium quantity will fall equibrium quantity will rise

Answer 1

An increase in the number of coffee shops signifies greater demand for coffee shop workers, leading to a rise in both the equilibrium wage and the equilibrium quantity of labor hired.

Step-by-step explanation:

If the number of coffee shops increases, we can analyze the consequences for the market of coffee shop workers by considering the laws of supply and demand in labor markets. Specifically, when there's an increase in the number of coffee shops, this represents an increase in the demand for coffee shop workers.

As a result, the equilibrium wage for coffee shop workers will rise, because more employers are competing to hire workers, which increases the price of labor. Additionally, the equilibrium quantity of labor hired will also rise, since more workers are needed to staff the additional coffee shops. A higher equilibrium wage incentivizes more individuals to work in coffee shops, increasing the supply of labor until the new equilibrium is reached. Therefore, the statements that the equilibrium wage will rise and the equilibrium quantity will rise are both correct.

Answer 2

An increase in the number of coffee shops leads to higher demand for coffee shop workers, causing the equilibrium wage and the equilibrium quantity of labor hired to rise.

Step-by-step explanation:

If the number of coffee shops increases, this represents an increase in the demand for coffee shop workers.

According to the law of demand and supply, when there is an increase in demand for labor, and if wages are able to rise, two main consequences follow:

• The equilibrium wage will rise, because employers will compete to hire workers, bidding up wages.
• The equilibrium quantity of labor hired will rise, reflecting the increase in the number of coffee shop workers needed to staff the additional coffee shops.

Therefore, the increase in the number of coffee shops will lead to a rise in both the equilibrium wage and the equilibrium quantity of coffee shop workers.