Discuss the correct and incorrect economic analysis in the following statement
"The United Auto Workers Union has successfully negotiated a 9 percent increase in wages for its workers.
This increase in the wage rate causes an increase in demand for automobiles, since many consumers now have greater incomes, and also a decrease in the supply of automobiles because the cost of production has increased. These effects cancel each other out resulting in no change in equilibrium price and quantity in the automobile market."
The wage rate is a determinant of the supply of automobiles, but not a determinant of the demand for automobiles. The increase in the wage rate will shift the automobile supply curve to the left along a given demand curve. This will result in a higher equilibrium price and a lower equilibrium quantity in the market for automobiles.
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If the price of sandals is fixed by law below the market-clearing price,
A) a surplus of sandals will result. B) sandal inventories at shoe stores will be smaller. C) sandal sellers will spend more on advertising. D) the quantity of sandals demanded will be greater than the quantity supplied. E) the quantity of sandals demanded will be less than the quantity supplied.
Fiscal policy is implemented primarily by
A) local governments alone. B) the defense department. C) state governments alone. D) the federal government. E) state and local governments.
If profits are reinvested in the corporation, then
A. the company will sell more bonds in order to pay dividends to stockholders. B. payments made to bondholders will be less. C. the high profits indicate that common stockholders will get larger dividends than normal. D. there are fewer funds available to distribute to stockholders.
Refer to Scenario 9.6 below to answer the question(s) that follow. SCENARIO 9.6: Celeste borrowed $40,000 from her brother to open a car wash. She pays her brother a 5% yearly return on the money he lent her. Her other yearly fixed costs equal $18,000. Her variable costs equal $40,000. In her first year, Amy sold 40,000 car washes at a price of $2.50 per car wash.Refer to Scenario 9.6. Celeste's profit is
A. $0. B. $20,000. C. $30,000. D. $40,000.