Question

Which of the following statements is true?

a) The market demand for labor is the horizontal "addition" of the firms' demand curves for labor.
b) The elasticity of demand for labor is the percentage change in quantity demanded of labor divided by the percentage change in the wage rate.
c) The factor demand curve will shift to the right if the price rises for the good the factor goes to produce.
d) The factor supply curve in an industry will shift to the left as wage rates in that industry rise.

Answer 1

Answer:

The correct answer is d) The factor supply curve in an industry will shift to the left as wage rates in that industry rise.

Explanation:

The demand for factors is based in the demand for the goods and services that are produced using these factors and if the demand for the source good decreases, the demand for the production factor will also decrease.

In this case, when the market wages increase, the ability of suppliers to use labor goes down and as a result the demand curve will shift left.