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Slide 1

The initial graph shows the original demand curve, D0.  At the intersection of D0 and the supply curve, a quantity Q0 of labor is supplied at a wage rate of W0.

As productivity rises, the demand curve shifts out to the right.  Go to the next slide to see this.

A supply and demand graph is shown, with Quantity of Labor on the x axis and Wage Rate on the y axis. The original demand curve is labeled D0. An equilibrium point is shown at Q0 and W0.

What effect do you think this will have on wages?

The demand for labor—that is, the quantity of labor that business is willing to hire at any given wage—has been shifting out a little each year because of rising productivity, from D0 to D1 to D2.

A supply and demand graph is shown, with Quantity of Labor on the x axis and Wage Rate on the y axis. An equilibrium point is shown at Q0 and W0. In addition, two new demand curves, D1, and D2 are shown to the right of D0.
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