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Questions and Answers
Are markets always in equilibrium?
Are markets always in equilibrium?
False (B)
If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________.
If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________.
increases; fall
A straightforward example of a _______________, often used for simplicity, is the interest rate.
A straightforward example of a _______________, often used for simplicity, is the interest rate.
rate of return
If the price of butter rises, then in the market for margarine, what happens?
If the price of butter rises, then in the market for margarine, what happens?
When consumers and businesses have greater confidence that they will be able to repay in the future, what happens?
When consumers and businesses have greater confidence that they will be able to repay in the future, what happens?
Whenever there is a shortage at a particular price, the quantity sold at that price will equal what?
Whenever there is a shortage at a particular price, the quantity sold at that price will equal what?
The labor ____________ curve(s) will shift _______________ if there is an increase in productivity or an increase in the demand for the final product.
The labor ____________ curve(s) will shift _______________ if there is an increase in productivity or an increase in the demand for the final product.
What will be the likely effect of increasing the minimum wage in Ontario from $8.75 to $9.50 during a recession?
What will be the likely effect of increasing the minimum wage in Ontario from $8.75 to $9.50 during a recession?
As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.
As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.
If D1 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are __________ and __________, respectively.
If D1 and S1 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are __________ and __________, respectively.
What results in a rightward shift of the market demand curve for labor?
What results in a rightward shift of the market demand curve for labor?
The United States has approximately ___________ credit card holders.
The United States has approximately ___________ credit card holders.
What is the likely economic effect of steel mill wage costs increasing by 18 percent over a year?
What is the likely economic effect of steel mill wage costs increasing by 18 percent over a year?
Improvements in the productivity of labor will tend to what?
Improvements in the productivity of labor will tend to what?
If the demand schedule changes from D1 to D2, what happens to the equilibrium price?
If the demand schedule changes from D1 to D2, what happens to the equilibrium price?
If the demand schedule changes from D2 to D1, what happens to the equilibrium quantity?
If the demand schedule changes from D2 to D1, what happens to the equilibrium quantity?
If the government imposes a price ceiling of $4, what happens?
If the government imposes a price ceiling of $4, what happens?
The 'law of supply' functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.
The 'law of supply' functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.
The movement from __________ to __________ is consistent with a decrease in the price of cotton (a substitute).
The movement from __________ to __________ is consistent with a decrease in the price of cotton (a substitute).
Which of the following will not result in a rightward shift of the market supply curve for labor?
Which of the following will not result in a rightward shift of the market supply curve for labor?
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Study Notes
Market Equilibrium
- Markets typically move toward equilibrium in the absence of outside interference.
- Not all markets are always in equilibrium; fluctuations are common.
Wages and Supply/Demand
- If demand for software engineers grows slower than supply, wages will decrease.
- The labor demand curve shifts rightward with increased productivity or higher product demand.
Substitutes and Market Effects
- In markets with substitutes, like butter and margarine, a price increase in one leads to higher equilibrium prices and quantities in the other.
Financial Capital Demand
- Increased consumer and business confidence causes the quantity demanded for financial capital to shift right at any given interest rate.
Shortages in Pricing
- In the presence of a shortage, the quantity sold at a specific price matches the quantity supplied at that price.
Impact of Minimum Wage
- Raising the minimum wage during a recession can lead to increased unemployment due to leftward shifts in the labor demand curve.
Technology and Labor Demand
- Availability of technology as a substitute reduces the demand for low-skill labor, shifting the demand curve leftward.
Credit Card Statistics
- Approximately 180 million credit card holders exist in the United States.
Cost Increases in Production
- An 18% rise in wage costs for steel mills likely leads to higher steel prices due to a leftward supply curve shift.
Labor Productivity
- Improved productivity generally raises wages across the labor market.
Changes in Demand and Equilibrium
- A shift in the demand schedule from D1 to D2 results in an increase in equilibrium price from $6 to $8.
- A reverse shift from D2 to D1 decreases equilibrium quantity from 15 to 13.
Price Ceilings and Shortages
- Imposing a price ceiling at $4 when demand is at D1 and supply at S2 leads to a 10-unit shortage.
Labor Supply Relationship
- The law of supply applies to labor markets, indicating that a higher price for labor increases the quantity supplied.
Market Supply Curve Shifts
- An increase in labor productivity does not contribute to a rightward shift in the market supply curve for labor.
Demand Curve Shifts
- Rightward shifts in the market demand curve for labor occur with increased demand for a firm's products.
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