Chapter 11: Problem 4

If demand for a product falls, the demand curve for labor used to produce the product will shift a. leftward. b. rightward. c. upward. d. remain unchanged.

Short Answer

Expert verified

The correct answer is (a) leftward shift. When demand for a product falls, the demand curve for labor used to produce the product will most likely shift leftward, as firms require fewer workers for the reduced production.

Step by step solution

Define Key Terms

Let's start by defining the key terms: 1. Demand for a product: The amount of a good or service that consumers are willing and able to purchase at various prices. 2. Demand curve for labor: A graphical representation of the relationship between the wage rate (price of labor) and the quantity of labor that employers are willing and able to hire.

Option (a): Leftward Shift

A leftward shift of the demand curve for labor means that the quantity of labor demanded decreases at each wage rate. When demand for a product falls, it implies that consumers are willing to buy less of the product at each price. This would likely cause firms to reduce production, requiring fewer workers to produce the good. Thus, the demand for labor would decrease. So, a leftward shift in the demand curve for labor is possible.

Option (b): Rightward Shift

A rightward shift of the demand curve for labor means that the quantity of labor demanded increases at each wage rate. When demand for a product falls, it is not logical that firms would need more workers to produce the good, as the quantity demanded is decreasing. Therefore, a rightward shift in the demand curve for labor is unlikely.

Option (c): Upward Shift

An upward shift of the demand curve for labor would mean that employers are willing to hire more workers at a higher wage rate. However, this option does not explain any new relationship between wage rate and quantity of labor demanded. Upward shift of the demand curve is not a concept in economics and it does not relate to the given question.

Option (d): Remain Unchanged

If the demand curve for labor remains unchanged, it implies that the decrease in demand for the product does not affect the demand for labor used to produce the product. This is unlikely, as a decrease in product demand typically leads to a decrease in production and consequently, a reduction in the demand for labor.

Conclusion

Based on the analysis of each option, the correct answer is (a) leftward shift. When demand for a product falls, the demand curve for labor used to produce the product will most likely shift leftward, as firms require fewer workers for the reduced production.

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