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Question
Macroeconomics
Posted 3 months ago

Cheese and bread are complementary goods, and the price of cheese has increased.

What happens in the labor market for bread bakers as a result?
Choose 1 answer:
(A) Employment and wages increase.
(B) The supply of labor decreases.
(c) The supply of labor increases.
(D) The labor market for bread bakers is not affected.
(E) Employment and wages decrease.
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Answer from Sia
Posted 3 months ago
Solution
a
Complementary Goods: When two goods are complements, an increase in the price of one leads to a decrease in the demand for the other
b
Demand for Labor: The demand for labor is derived from the demand for goods. If the demand for bread decreases due to the increase in the price of cheese, the demand for bread bakers will decrease
c
Employment and Wages: A decrease in the demand for labor typically leads to a decrease in employment and wages in that labor market
Answer
E: Employment and wages decrease.
Key Concept
Derived Demand for Labor
Explanation
Since bread and cheese are complementary goods, an increase in the price of cheese decreases the demand for bread, which in turn decreases the demand for bread bakers, leading to lower employment and wages in the labor market for bread bakers.

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