A. Everything else remaining unchanged, what is likely to happen to the demand curve for coffee workers if:

Question

i. there is a fall in the price of coffee.
ii. there is an increase in the wage rate.
iii. there is a rise in the price of coffee seeds.
iv. a new fertilizer that increases the productivity of coffee farmers is invented.
b. Everything else remaining unchanged, what is likely to happen to the supply curve of female workers if:
i. the opportunity cost of working outside home decreases.
ii. there is an increase in the wage rates.

Answer 1

a. i. A decrease in the price of coffee reduces the value of marginal product of coffee workers. Therefore, the demand curve for coffee workers shifts to the left.
ii. If there is an increase in the wage rate, the quantity demanded of coffee workers will decrease. This will cause a upward movement along the demand curve for coffee workers.
iii. An increase in the price of coffee seeds is likely to result in a decrease in the marginal product of coffee farmers. This in turn will cause a leftward shift in the demand curve for coffee workers.
iv. If a new fertilizer that increases the productivity of coffee farmers is invented, it will increase the value of marginal product of coffee workers. This will cause a rightward shift in the demand curve for coffee workers.
b. i. If the opportunity cost of working outside home decreases, it implies that there is a reduction in the time consumed on household chores. This encourages workers to shift more time out of home production into paid employment. This will increase the supply of female workers at all wage rates. The change will cause a rightward movement in the supply curve of women workers.
ii. If there is an increase in the wage rate, there will be an increase in the quantity supplied of women workers. This will cause an upward movement along the supply curve of female workers.