Question

Assume the market demand curve is D1, the market supply curve is S and equilibrium is at E. Now the market wage rate paid to truck drivers increases from R250 to R300. Identify the type of disequilibrium that will result from such a wage increase.

Answer 1

Since there will be an increase in labor supply on the market from truck drivers, this will lead to an excess of labor. But an increase in wages in one of the links in the market infrastructure leads to higher prices in other sectors of the economy related to this area. The increase in prices always leads to an excess, as the number of buyers of this product decreases.