When a union raises the wage above the equilibrium level, it
a. reduces both the quantity of labor supplied and the quantity
of labor demanded.
b. reduces the quantity of labor supplied and raises the
quantity of labor demanded.
c. raises the quantity of labor supplied and reduces the
quantity of labor demanded.
d. raises both the quantity of labor supplied and the quantity
of labor demanded.
Answer
C. Raises the quantity of labour supplied and reduces
the quantity of labour demanded.
1. This phenomenon will also result in increase/rise of
unemployment due to increase in heavy union wages in union based
industries due to heavy competition in labour market.
2. Due to increase in wages of union based industries, the wages
of non union based industries decrease due to increase of supply in
labour due to union based industries.
3. Unions benefit from collective bargaining whereas non union
based companies will bear some of the costs.
