workers, but another common way to measure the quantity of labor is by the number of hours worked. The

vertical axis shows the price for nurses’ labor—that is, how much they are paid. In the real world, this “price”

would be total labor compensation: salary plus benefits. It is not obvious, but benefits are a significant part (as

high as 30 percent) of labor compensation. In this example we measure the price of labor by salary on an

annual basis, although in other cases we could measure the price of labor by monthly or weekly pay, or even
the wage paid per hour. As the salary for nurses rises, the quantity demanded will fall. Some hospitals and

nursing homes may reduce the number of nurses they hire, or they may lay off some of their existing nurses,

rather than pay them higher salaries. Employers who face higher nurses’ salaries may also try to replace some

nursing functions by investing in physical equipment, like computer monitoring and diagnostic systems to
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