Learning Objective Covered Analyze the impact of unions on wages. The following video explains effects of a labor union raising workers' wages on the labor market from a graphical perspective. Then you will practice measuring those effects for a specific labor market. Watch the following video, then answer the questions that follow. The following graph shows the competitive labor market for the industry producing magic hats. Initially, this market is in equilibrium. However, eventually, magic hats makers form a union to negotiate a higher wage rate of $14 per hour with their employers. Suppose that the union was successful at convincing employers to hire only union members. So no other workers could ever set foot at the factories producing magic hats. Adjust the following graph to illustrate the effect of a higher wage rate on the labor market. Demand Supply 0 2 4 6 8 10 12 14 16 18 20 20 18 16 14 12 10 8 6 4 2 0 WAGE RATE (Dollars per hour) QUANTITY OF LABOR (Thousands of industry workers) Demand Supply As a result of a wage increase, employment by thousand workers