In a competitive resource market, a decrease in the demand for a productive resource, ceteris paribus, will cause all of the following except a(n)
A) decrease in the price of the resource.
B) increase in the price of the resource.
C) decrease in the total income earned by all units of the resource.
D) decrease in the number of units of the resource that are employed.

Question

Quizplus · Accepted Answer

According to the law of demand, when demand decreases, the price of the resource should also decrease. Additionally, with a decrease in demand, there will be less demand for units of the resource, and therefore a decrease in the number of units that are employed. Furthermore, with a decrease in demand, the total income earned by all units of the resource will be reduced. Therefore, option B, an increase in the price of the resource, is inconsistent with the law of demand and would not occur.

In a Competitive Resource Market, a Decrease in the Demand