Suppose that the labor market for life guards is initially in equilibrium. Then swimming pool owners adopt a new labor-saving te
chnology that uses computers to monitor the locations of swimmers in the pool. What happens to the equilibrium wage and quantity of life guards?
a. Both the equilibrium wage and quantity increase.
b. Both the equilibrium wage and quantity decrease.
c. The equilibrium wage increases, and the equilibrium quantity decreases.
d. The equilibrium wage decreases, and the equilibrium quantity increases.
a. Both the equilibrium wage and quantity increase.
b. Both the equilibrium wage and quantity decrease.
c. The equilibrium wage increases, and the equilibrium quantity decreases.
d. The equilibrium wage decreases, and the equilibrium quantity increases.
1 answer:
Answer:
b. Both the equilibrium wage and quantity decrease.
Explanation:
When a market is in equilibrium, quantity supplied equals quantity demanded.
When swimming pools adopt labour saving technology, the quantity of labour demanded falls. This leads to a decrease in equilibrium wage and quantity . When supply exceeds demand, wages fall and labour would leave the lifeguard industry due to decreased demand.
Check out the attached image for a graphical explanation
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Answer:
c. fall in the short run, and fall even more in the long run.
Explanation:
The aggregate demand shifts to the left in recession or contractions, in consequence the level of prices falls. For this analysis we consider the shor-run supply curve with a positive slop.
As we know, the economy in the long run tends to equilibrium, where the the production level is fixed and equal to the potential of production of the economy. The initial reduction of prices incentives the consumption in the long run, stabilizing with the long run quantites in a minor level of prices.
In the attached image you can observe the process described previously.
