If producers who hire labourers in a competitive labour market decide to purchase new automated machines that complete the work of 30 employees at once, which of the following is true?Question 4Select one:A.The demand curve for the labour market shifts left.B.The supply curve for the labour market shifts right.C.The supply curve for the labour market shifts left.D.The demand curve for the labour market shifts right.
Question
If producers who hire labourers in a competitive labour market decide to purchase new automated machines that complete the work of 30 employees at once, which of the following is true?Question 4Select one:A.The demand curve for the labour market shifts left.B.The supply curve for the labour market shifts right.C.The supply curve for the labour market shifts left.D.The demand curve for the labour market shifts right.
Solution
The correct answer is A. The demand curve for the labour market shifts left.
Here's why:
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In a competitive labour market, the demand for labour is determined by the number of workers that producers are willing and able to hire at different wage rates.
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If producers decide to purchase new automated machines that complete the work of 30 employees at once, they will need fewer workers. This means that, at any given wage rate, they will demand fewer workers.
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A decrease in the demand for labour, all other things being equal, is represented by a leftward shift of the demand curve in the labour market.
So, when producers purchase new automated machines, the demand for labour decreases and the demand curve for the labour market shifts to the left.
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