Answer to Question #146057 in Microeconomics for kamran

Question

Suppose that labour and capital are imperfect complements. Illustrate consequences of fall in wage rate on producer´s optimum and account for two decisive effects 

Answer 1

A fall in wage rate results to the aggregate supply curve to shift outward meaning the quantity supplied at any price level increases. As the price of a commodity lowers the consumers will buy more of it and more output will be produced and sold resulting in high labour force. The producer will incur high cost to pay the workers which will be expensive.