Answer to Question #131126 in Microeconomics for Buhlebenkosi

Question

What type of disequilibrium that will result from such a wage increase

Answer 1

Disequilibrium is a condition where internal and/or external forces hinder the achievement of market equilibrium or cause the market to fall out of balance. This may be a short-term byproduct of a shift in variable factors or a consequence of systemic imbalances in the long term.

In the labor market, disequilibrium can occur from an economic perspective. A disparity in the labor market can arise when the government imposes a minimum wage, a price limit on the salary an employer will pay to its workers. If the price level stipulated is higher than the equilibrium price of labor, there would be a surplus supply of labor in the economy.

Structural Disequilibrium

It occurs because of structural changes in the economy that influence demand and supply relationships in the product and factor market. Structural disequilibrium of payments imbalance continues for much more extended periods, as the elimination of structural imbalances in the economy is not simple.

If a country's supply status is affected by factors such as crop failure, raw-material scarcity, strikes, political unrest, etc., then the balance of payments deficit will emerge.

The answer to the question is Structural Disequilibrium.