Question

Holding other factors constant, if food prices decline relative to the prices of other products, then the real wages of agricultural workers will ______ and employment of agricultural workers will _____
a) increase; increase
b) decrease; decrease
c) decrease; not change
d) increase; decrease

Answer 1

Answer:

Option (B) is correct.

Explanation:

Food is produced by the agricultural workers or farmers and sold in the market. Now, holding the other things constant, if there is a fall in the price level of food then as a result there is a fall in the real wage of the agricultural workers because of the reduction in the wages as selling price of their product decreases.

This will also lead to a reduction in employment of agricultural workers because of lower real wage.