(a) the demand for the product by labor declines.
(b) the prices of substitute inputs falls.
(c) the productivity of labor increases.
(d) the wage rate declines.
(e) None of the above.
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Answer: A shift to the right of the demand curve for labor means that the demand for labor as increased at every wage rate. We will examine (a) through (d) to see if any of these would cause the demand for labor to rise.
(a) If the demand for the product produced by labor declines, then the demand for labor should decline. So this doesn't work.
(b) If the prices of substitute inputs falls, then you would expect companies to switch from labor to substitute inputs. Thus the demand for labor should fall. So this doesn't work.
(c) If the productivity of labor increases, then employers will demand more labor. So this one does work!
(d) The wage rate declining causes a change in quantity demanded not demand. So this doesn't work.
Thus the correct answer is (c).
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I hope you found these supply and demand question useful!
