ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A decrease in the wages of auto workers will increase supply because firms will be willing to supply more cars at each price level when production costs fall.

Detailed explanation-2: -A fall in the money wage rate makes the aggregate supply curve shift outward, meaning that the quantity supplied at any price level increases.

Detailed explanation-3: -The supply curve for labor will shift as a result of a change in worker preferences, a change in nonlabor income, a change in the prices of related goods and services, a change in population, or a change in expectations.

Detailed explanation-4: -Shifts of the Labor Supply Curve If the labor supply increases, then the labor supply curve shifts to the right. If it decreases, it will shift to the left. As illustrated in the graph below, an increase in labor supply causes a decrease in wage, and, a decrease in labor supply causes an increase in wage.

Detailed explanation-5: -When wages increase, the opportunity cost of leisure increases and people supply more labor. Interestingly, this is not always the case! At higher wages, the marginal benefit of higher wages becomes lower and when it drops below the marginal benefit of leisure, people switch to more leisure and less labor.