Question

You and other college students are deciding whether to major in music or engineering. You learn that there is a shortage of engineers making it easy for engineering graduates to find employment while there is a glut of musicians for whom finding a job is difficult. As a result you and many other college students decide to major in engineering. What economic principle does this illustrate?
a. Specilization leads to economic efficiency
b. Government intervention can imporve efficiency when there is a market failure
c. Individuals do not normally take into account the decisions of other individuals
d. Markets tend to move towards equilibrium as individuals respond to incentives
e. Changes in incentives are unlikely to change the decisions people make

Answer 1

Answer:

d) Markets tend to move towards equilibrium as individuals respond to incentives

Explanation:

The equilibrium is the single point where the demand meets the supply. Individuals, tend to move following their own benefit, so if the demand of engineers is bigger than the supply of them, they will be better paid and become easier to find a job...individuals want to find a job with a better pay, so they will decide to major in Engineering.

As the number of engineers increase, the supply will meet the demand of them and the number of  jobpostings for engineers will decrease as well as their extra pay meeting the equilibrium point.

Thats how the Markets tend to move towards equilibrium as individuals respond to incentives

Good Luck!

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