Asked by Julia Kochman on Jul 15, 2024
Verified
Suppose that the market for labor is initially in equilibrium. A decrease in the price of output will cause the equilibrium wage
A) and the equilibrium quantity of labor to fall.
B) and the equilibrium quantity of labor to rise.
C) to rise and the equilibrium quantity of labor to fall.
D) to fall and the equilibrium quantity of labor to rise.
Equilibrium Wage
The wage rate at which the quantity of labor supplied and the quantity of labor demanded are equal.
Price of Output
The amount of money charged for a product or service produced by a business or an economy.
Labor
The application of human physical and intellectual labor in the creation of goods and services.
- Understand the effects of a change in the market price of goods on labor demand and wages.
Verified Answer
MJ
Myrline JosephJul 16, 2024
Final Answer :
A
Explanation :
A decrease in the price of output would lead to a decrease in the demand for labor, as firms would generate less revenue from their products and thus would be less willing or able to pay for labor. This would cause both the equilibrium wage and the equilibrium quantity of labor to fall.
Learning Objectives
- Understand the effects of a change in the market price of goods on labor demand and wages.