A rightward shift of the AD curve in the very flat part of the short-run as curve


As wages increase, the demand for goods and services will also increase. The result of this is that companies will be able to charge higher prices due to increased demand. We see this happen with minimum wage laws in certain states where there are mandated increases in hourly pay rates for workers.

With these changes, we can expect an upward shift on the supply curve as well since firms have more money to spend on their production process while still remaining competitive in terms of price. This means that when both curves shift upwards following a change in wages, they do so by different amounts which would make it difficult for the market equilibrium point (the intersection between the two curves) to stay unchanged.

refugees, economic migrants, financial equalization @ Pixabay

This means that the equilibrium point would shift to either left or right. The effects of an increase in wages on prices is a question we cannot answer for certain because it depends on factors such as how much increased demand will be, what other changes occur simultaneously with this change, and what happens when supply curve shifts upwards due to higher costs which are necessary for production processes.

But one thing can be said, companies will have more money available for their businesses so they will likely charge consumers higher prices while still profiting from these increases at some level even if not all firms do. This makes sense considering that most goods and services produced require labor input from workers who need to be compensated for their time spent working each day. 


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