Question

One reads in the newspaper: "Today the president and Congress enacted a law which adds new requirements that child care providers must meet before they can offer their services for sale." As a result, an economist would predict that ___________.
A) the supply of child care services will increase, thus lowering the price of child care services.B) the supply of child care services will be unaffected by the stiffer requirements and therefore the price of child care services will not change.C) the demand for child care services will fall because people who buy child care services do not want stiffer requirements placed on child care providers.D) the supply of child care services will decrease, thus raising the price of child care services.E) none of the above

Answer 1

Answer:

D) the supply of child care services will decrease, thus raising the price of child care services

Explanation:

One reads in the newspaper: "Today the president and Congress enacted a law which adds new requirements that child care providers must meet before they can offer their services for sale." As a result, an economist would predict that the supply of child care services will decrease, thus raising the price of child care services.

An economist would predict it based on the new requirement that is been enacted as law, if the new requirement will cost the service provider more money to operate or it hinder the mods of operation or probably requirement of getting license to provider child care has been tough up; these factor might lead to decrease in the numbers of child care providers which in turn will lead to shift in production and the consumer will have to pay more for the service since there are limited number of child care providers

Answer 2

Answer: D. the supply of child care services will decrease, thus raising the price of child care services.

Explanation: From an economist perspective, the additional requirement added by congress that a child care providers must meet before they can offer their services for sale will lead to a decrease in the number of organizations offering childcare facilities. This is due to the additional restraint which some existing and new companies may find difficult to meet.

Consequently, the decline in the number of service providers will lead to decrease in service supply and ultimately leading to price increase resulting from inability of supply to adequately cater for the available demand.