Equilibrium in the labour market

After you have worked through this section of the learning unit, you should be able to:

  • explain and illustrate labour market equilibrium, excess demand for labour and excess supply of labour

Equilibrium in the labour market occurs where the quantity of labour demanded equals the quantity supplied.

The following diagram represents the labour market for a manufacturer of shoes:

  • At which point is the quantity of labour demanded equal to the quantity of labour supplied?
  • What is the equilibrium quantity of labour units?
  • What is the equilibrium wage rate?
Click to Show Answer

Equilibrium occurs a point E where the quantity of labour demanded is equal to the quantity supplied. The equilibrium quantity of labour is 2 000 and the equilibrium wage rate is R100.