Practice question · Multiple choice
Labour demand is called a DERIVED demand. What follows for a union negotiating wages in a shrinking industry?
Hints
- Ask where the money to pay wages ultimately comes from.
- What happens to employment when the product market is contracting?
Show the answer
B. That the ceiling is set by demand for the product
Why
Workers are wanted because customers want the product. When that demand falls the derived demand falls with it, which is why bargaining power tracks the health of the product market.
Practise Labor Economics
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