1. How changes in the goods market affect the demand for labor In this question,

Question

1. How changes in the goods market affect the demand for labor In this question, you'll explore the effect of a change in demand for strawberries in the United States on the daily wages of strawberry pickers in California. Assume that a new medical study shows that eating strawberries can cause cancer On the following graph, show the effect of the new medical study on the market for strawberries in the United States by shifting either the demand curve, the supply curve, or both. 2 Market for Strawberries in the United States 10 Demand Supply 5O 100 150 200 250 300 350 400 450 500

Explanation / Answer

We are given that eating strawberry causes cancer . So this will lead to a decrease in demand since less people will buy strawberry . Hence the demand curve will shift to left .

If the demand curve shifts to left , it is observed that kleeping the supply constant ,we will see that the price reduces ie any price less than $5 . Also the quantity demanded will also reduce keeping the supply curve constant . so the quantity demanded will be anything less than 250 ( corresponding to the price level since the two demand curves will be parallel . )

So the price of strawberries in US will fall ( since less and less people will be buying it )

Now if the demand for strawberries has reduced , the income of the suppliers or sellers of strawberries will reduce , so they would want to reduce the labour force or the wages of the workers employed in this business.

Hence the wages of the strawberry pickers reduces as their demand reduces. So again the demand curve will shift to the left , this time of the labour market which results in decrease in both qunatity and wages of labour.

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