Answer to Question #226620 in Macroeconomics for poiuytrew

Question

Which of the following statements is/are correct?

 

1. Ceteris paribus, as the real wage rate increases, the quantity of labour demanded increases. 
2. An increase in the working age population results in an increase in the supply of labour. 
3. A change in the real wage rate brings a movement along the labour supply curve. 
4. The demand for labour is determined by the diminishing returns to labour.

Only (i), (iii) and (iv) are correct.

Only (ii), (iii) and (iv) are correct.

Only (i) and (iii) are correct.

Only (i), (ii) and (iv) are correct.

Answer 1

Solution:

The correct answers are 2, 3, and 4.

Only (ii), (iii) and (iv) are correct.

2.). An increase in the working-age population results in an increase in the supply of labor due to an increase in the working population.

 

3.). A change in the real wage rate brings a movement along the labor supply curve since it will result in a change in the quantity of labor demanded or supplied.

 

4). The demand for labor is determined by the diminishing returns of labor. This is because the demand for labor varies inversely with the wage rate in line with the law of diminishing returns. This law states that, if a firm employs an additional variable factor, such as labor ceteris paribus, the additional return to extra workers will begin to diminish.