Suppose it is observed that the equilibrium wage and employment level have both risen in a competitive labor market. one can infer that:

a. the demand for labor has increased.
b. the supply of labor has decreased.
c. the supply of labor has increased.
d. the demand for labor has decreased.

A. The demand for labour has increased

Explanation:

The demand for labour is done by firms , supply by the labourers themselves. As usual commodity demand curve , this demand curve is also downward sloping because of inverse wage - labour demand relationship (more labour demand at lower wages & vice versa).

Labour supply curve -by labourers : is upward sloping (upto a point) because of direct wage , labour supply relationship (more labour supply at higher wages & vice versa)

If the demand for labour increases , the downward sloping demand curve shifts rightwards. Interacting with unchanged upward sloping supply curve -  labour excess demand pushes the wages upwards , labour employed rightwards. It increases both price (wage) & quantity (employment) .

If supply decreases, excess demand still increases wages , but the new employment level is lesser .If supply increases , excess supply implies more employment at lower wages . Decreased demand leads to less employment & lower wage rates .

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