Question

Labor is a resource that is necessary to produce many goods. "If the price of labor falls," says the economist, "the prices of goods will soon follow." How does this work?
a. the supply of goods rises
b. the demand for goods falls
c. the demand for goods rises
d. the supply of goods falls

Answer 1

Labor is a resource that is necessary to produce many goods. "If the price of labor falls," says the economist, "the prices of goods will soon follow."
This works because A) the supply of goods rises.

Answer 2

If the price of labor falls, the supply of goods rises, and the prices of those goods fall.

The right answer is: a. the supply of goods rises