Refer to the above graph. What will shift D 1 to D 2 ? A decrease in productivit
ID: 1105721 • Letter: R
Question
Refer to the above graph. What will shift D1 to D2?
A decrease in productivity
An increase in product demand
An increase in the price of complementary input
A decrease in the price of a substitute input (if the substitution effect is greater than the output effect)
A.A decrease in productivity
B.An increase in product demand
C.An increase in the price of complementary input
D.A decrease in the price of a substitute input (if the substitution effect is greater than the output effect)
Quantity of LaborExplanation / Answer
An increase in the price of substitute input will reult in increase in the demand for labor at the prevailing wage rate in the market. The substitution effect in this case is greater than the output effect.
Thus the correct option should be D.