information, it becomes difficult for everyone—buyers and sellers alike—to react in a flexible and appropriate

manner as changes occur throughout the economy.

BRING IT HOME

Baby Boomers Come of Age
The theory of supply and demand can explain what happens in the labor markets and suggests that the demand for

nurses will increase as healthcare needs of baby boomers increase, as Figure 4.10 shows. The impact of that

increase will result in an average salary higher than the $75,330 earned in 2020 referenced in the first part of this
case. The new equilibrium (E1) will be at the new equilibrium price (Pe1).Equilibrium quantity will also increase from
Qe0 to Qe1.

FIGURE 4.10 Impact of Increasing Demand for Nurses 2020–2030 In 2020, the median salary for nurses was
$75,330. As demand for services increases, the demand curve shifts to the right (from D0 to D1) and the equilibrium
quantity of nurses increases from Qe0 to Qe1. The equilibrium salary increases from Pe0 to Pe1.
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