Q26 Why are the factors that shift t... [FREE SOLUTION]

Chapter 4: Q26 (page 105)

Why are the factors that shift the demand for a product different from the factors that shift the demand for labor? Why are the factors that shift the supply of a product different from those that shift the supply of labor?

Short Answer

Expert verified

Factors shifting goods' demand denote buyers' aspect - income, substitute & complementary goods. Factors shifting goods' supply denote sellers' aspect - cost of production, technology, other good price. Factors shifting labor supply denote workers' aspect - Work preferences, leisure preferences, future expectations

Step by step solution

Goods Market Concepts

Factors shifting buyers' demand are the factors other than price effecting demand :

Price of substitute goods - Directly related to demand
Price of complementary goods - Inversely related to demand
Income - Directly related to demand

Factors shifting sellers' supply are the factors other than price effecting supply :

Cost of production - Inversely related to supply
Technology - Directly related to supply
Other goods' price - Inversely related to supply

Labour Market Concept

Factors effecting workers' supply of labor are factors other than wage affecting labor supply

Work preferences - Desirability for more work time increases supply, & vice versa.
Leisure preferences - Desirability for more leisure time decreases supply, & vice versa.
Future Expectations - future income & time preferences also effect labor supply.