Question

Dan owns one of the many bakeries in New York City. Which of the following events will lead to an increase in Dan's demand for the services of bakers?
(i) The price of muffins increases. (Muffins are Dan's specialty.)
(ii) Dan adds three new ovens to the kitchen area to help the bakers work faster.
(iii) Local bakers form a union to protect themselves from low wages.
a. (i) and (ii)
b. (ii) and (iii)
c. (i) and (iii)
d. All of the above are correct.

Answer 1

Answer:

The correct answer is - a. (i) and (ii).

Explanation:

If the market condition is favorable and Dan decides to expand his business, he will need to hire more bakers to provide more products to the market, and thus increase his profits.  

If the price of muffins increases (i) it means that there is a high demand on muffins among customers, for example during Holiday season, or because another big business ceased its operation.  

Similarly, in the case (ii) when Dan adds three more ovens to help his bakers to work faster, he seeks to satisfy increased demand for muffins. This is likely to lead to the expansion of his business and the need to hire more bakers.