Which of the following is true? Suppose that world demand shifts away - ProProfs Discuss
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Which of the following is true? Suppose that world demand shifts away from agricultural goods toward high-tech manufactured goods? The land is specific to agriculture, capital is specific to manufacturing, and labor is mobile between sectors.



A. The percentage change in capital income is less than the percentage change in labor income.
B. The percentage change in labor income is greater than the percentage change in the relative price of manufacturing goods.
C. The percentage change in capital income may be greater than zero.
D. The percentage change in labor income is less than the percentage change in the relative price of manufacturing goods.

This question is part of Quiz 3
Asked by Raghaaadboodai, Last updated: Jan 02, 2020

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2 Answers

M. Klose

M. Klose, Content Writer, Oakland

Answered Dec 05, 2018

The only correct answer is answer D: the change in labor income is less than the percentage change in the relative price of manufacturing goods. Labor will always be needed, so there’s little reason for the income of the laborers to change. However, with a sudden increase in demand for high-tech goods and a lower demand for agricultural goods, the prices will change. This is the supply and demand curve.

For those who don’t know what the supply and demand curve is, it’s simply a curve that shows that as demand goes down, supply goes up. If demand goes up, supply goes down. It’s also meant to help price items. As there is less demand and more supply, price goes down. If there’s more demand and less supply, price goes up.

 

John Smith

John Smith

Answered Feb 16, 2017

The percentage change in labor income is less than the percentage change in the relative price of manufacturing goods.
 

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