Chapter 18

Question: What causes the labor-demand curve to shift?

Good Answer: A shift in the labor-demand curve can be caused by the output price, technological change, and a few other factors. The output price is changed when the value of the marginal product changes. The marginal product value is calculated by multiplying the marginal product times a firms output price. When the output price changes, there is a shift in the curve. New technology usually increases the marginal product of labor, which in turn shifts the demand. Other factors could be one such as, a factory relying on an item that they don’t produce, to produce their product. If the product they rely on is in a shortage the curve could also shift.

Okay Answer: Output price and technological change could shift the labor-demand curve.

Question: What causes the labor-supply curve to shift?

Good Answer: Change in tastes, change in alternative opportunities and immigration can all shift the labor-supply curve. A change in taste or attitudes towards work can shift the labor-supply curve. Think if it became the norm that almost every highs schooner’s had a job and went to work right after school everyday of the week. The supply of labor would increase and the curve would shift. Alternative opportunities can also shift the curve. If there was a Qdoba and Chipotle side by side, and Qdoba raised there starting wage $4 higher than Chipotle’s, the supply of laborers at Qdoba would rise and drop at Chipotle. Thus, causing the curve to shift. Immigration can also play a huge role in the supply of labor. When more and more people from Mexico started migrating to America, the supply of labor dropped off in Mexico and rose in America, causing the curve to shift.

Okay Answer: Change in tastes, change in alternative opportunities and immigration.

Question: What are the three most important factors of production?

Good Answer: Land, labor and capital are the three most important factors of production. Land is the physical space. Labor is the time someone gives up for a benefit. Capital is the assets, such as machinery or computers in a factory.

Okay Answer: Land, labor and capital.