Suppose that a change to early retirement laws leads to a decrease in labour supply.This means that:

Question

Quizplus · Accepted Answer

A decrease in labor supply, assuming demand remains constant, would lead to a shortage of workers. This shortage increases the bargaining power of workers, leading to higher wages. The assumption that the supply curve is downward-sloping is standard in economic models, reflecting that as wages increase, more individuals are willing to work, and vice versa.

Suppose That a Change to Early Retirement Laws Leads to a Decrease