(Industrial Unions) Review the logic underlying the exhibit below. Then determine the effect, on the industry and a typical firm, of an increase in the demand for industry output. Show your conclusions on a graph. Does the magnitude of the increase in demand make a difference?

Exhibit 12.? Effect of Reducing Labor Supply or Increasing Labor Demand If a union can successfully restrict labor supply in an industry, the supply curve shifts to the left from S to 5'. as in panel (a). The wage increases from W to W'. but at the cost of reducing employment from E to E'. If a union can increase the demand for union labor. as in panel (b), the demand curve shifts right from D to D". raising the wage and increasing employment. (I) Reducing labor supply (b) increasing labor demand 5 Wage rate Wage rate 0 E' E Labor per period 0 E E\" Labor per period