ECONOMICS
PRICE CEILINGS AND FLOORS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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increase, more
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increase, fewer
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decrease, more
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decrease, fewer
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Detailed explanation-1: -The basis of the labor supply curve is the tradeoff of labor and leisure. When wages increase, the opportunity cost of leisure increases and people supply more labor.
Detailed explanation-2: -Wage increases cause inflation because the cost of producing goods and services goes up as companies pay their employees more. To make up for the increase in cost, companies must charge more for their goods and services to maintain the same level of profitability.
Detailed explanation-3: -An increased wage means a higher income, and since leisure is a normal good, the quantity of leisure demanded will go up. And that means a reduction in the quantity of labor supplied. For labor supply problems, then, the substitution effect is always positive; a higher wage induces a greater quantity of labor supplied.
Detailed explanation-4: -An increase in product demand will shift the demand for labor curve to the right, causing both wages and employment to increase.