Answer to Question #170012 in Microeconomics for Adarsh

Question

“Increase in the price of a commodity ‘X’ has no relationship with the level of employment in perfectly competitive product and factor markets”. Is this statement True or False? Justify and logically analyze your argument. Draw graphs if necessary. 

Answer 1

False.This is because if we assume that the employer sells his output that is commodity X in a perfectly competitive market, the value of each worker’s output will be the market price of the product and hence the relationship is evident