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Chapter 4: Q. 26 (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

Price transmits the information from goods market to affect the labor market.

Step by step solution

01

Step 1. Definition

The demand curve of both product and labor is downward, whereas the supply curve of both product and labor is upward. The demand and supply curve will shift up or down due to many forces active in the economy.

02

Step 2. Explanation

Demand for a product is dependent on the price of the product, price of subsidies, task and preference. Demand for labor is dependent on the wage rate in the market. A shift in the demand for a product is caused by factors related to the demand for product,

A shift in the demand for labor is associated with the cost of production, supply of inputs and demand for the product being produced.

03

Step 3. Conclusion

Factors that affect the supply of labor are related to incentive to work. The factors that affect the supply of a product are related to the inputs used in production.

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Most popular questions from this chapter

Identify each of the following as involving either demand or supply. Draw a circular flow diagram and label the flows A through F. (Some choices can be on both sides of the goods market.)

a. Households in the labor market

b. Firms in the goods market

c. Firms in the financial market

d. Households in the goods market

e. Firms in the labor market

f. Households in the financial market

If the government imposed a federal interest rate ceiling of 20% on all loans, who would gain and who would lose?

Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers.

  1. The number of people at the most common ages for home-buying increases.
  2. People gain confidence that the economy is growing and that their jobs are secure.
  3. Banks that have made home loans find that a larger number of people than they expected are not repaying those loans.
  4. Because of a threat of a war, people become uncertain about their economic future.
  5. The overall level of saving in the economy diminishes.
  6. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.

In the labor market, what causes a movement along the supply curve? What causes a shift in the supply curve?

Suppose the U.S. economy began to grow more rapidly than other countries in the world. What would be the likely impact on U.S. financial markets as part of the global economy?
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