Which of the following statements is true of factor markets?
(i) when the supply of a factor falls, its equilibrium price falls
(ii) when the supply of a factor rises, its equilibrium price falls
(iii) when the supply of a factor falls, its equilibrium price rises

Question

Quizplus · Accepted Answer

(ii) is true because an increase in the supply of a factor, all else being equal, leads to a decrease in its price due to surplus. (iii) is true because a decrease in the supply of a factor, all else being equal, leads to an increase in its price due to scarcity.

Which of the Following Statements Is True of Factor Markets