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Disequilibrium in the labour market and wage rates

I have attached a diagram for reference

Figure 9.4 provides measures of disequilibrium in the labour market. At a wage rate of (W/P)E the market is in equilibrium.

I would like to know does this mean that unemployment will not exist at this wage rate - explain? In addition, if unemployment does exist at this wage rate, can it be eliminated? If so, how?

I don't want an overly technical explanation, but I would like to be able to gain a good understanding of the above mentioned problems in the explanation. It would be of assistance if examples of 'real'situations could be provided to help reinforce the main concepts.


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Hi: I am providing a totally no-technical explanation. Let me know if this helps.

At (W/P)E, The demand for labor given by demand curve ND is equal to the supply for labor given by supply curve Ns. So there is no unemployment.

No employment here simply means that all the people who are willing to offer their labor at (W/P)E wage rate are employed by the industry at that wage rate. Similarly, at this wage rate, the demand for labor by the industry is just met. It does not mean that everyone available in the workforce is employed. There may be many people in the workforce who would not be willing to work at this wage rate (may be ...

Solution Summary

Explain in non-technical language measures of disequilibrium in the labor markets.