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Chapter 4: Q26 (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

Factors shifting goods' demand denote buyers' aspect - income, substitute & complementary goods. Factors shifting goods' supply denote sellers' aspect - cost of production, technology, other good price. Factors shifting labor supply denote workers' aspect - Work preferences, leisure preferences, future expectations

Step by step solution

01

Goods Market Concepts 

Factors shifting buyers' demand are the factors other than price effecting demand :

  • Price of substitute goods - Directly related to demand
  • Price of complementary goods - Inversely related to demand
  • Income - Directly related to demand

Factors shifting sellers' supply are the factors other than price effecting supply :

  • Cost of production - Inversely related to supply
  • Technology - Directly related to supply
  • Other goods' price - Inversely related to supply
02

Labour Market Concept 

Factors effecting workers' supply of labor are factors other than wage affecting labor supply

  • Work preferences - Desirability for more work time increases supply, & vice versa.
  • Leisure preferences - Desirability for more leisure time decreases supply, & vice versa.
  • Future Expectations - future income & time preferences also effect labor supply.

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Most popular questions from this chapter

Table 4.6 shows the amount of savings and borrowing in a market for loans to purchase homes, measured in millions of dollars, at various interest rates. What is the equilibrium interest rate and quantity in the capital financial market? How can you tell? Now, imagine that because of a shift in the perceptions of foreign investors, the supply curve shifts so that there will be $10 million less supplied at every interest rate. Calculate the new equilibrium interest rate and quantity, and explain why the direction of the interest rate shift makes intuitive sense.

Which of the following changes in the financial market will lead to an increase in the quantity of loans made and received:

a. rise in demand

b. a fall in demand

c. a rise in supply

d. a fall in supply

If a usury law limits interest rates to no more than 35%, what would the likely impact be on the amount of loans made and interest rates paid?

Are households demanders or suppliers in the goods market? Are firms demanders or suppliers in the goods market? What about the labor market and the financial market?

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