Labor is a resource that is necessary to produce many goods."If the price of labor falls," says the economist,"the prices of goods will soon follow." How does this work?
A) If the price of labor falls,the supply of goods rises,and the prices of those goods fall.
B) If the price of labor falls,the quantity supplied of goods rises,and the prices of those goods fall.
C) If the price of labor falls,the demand for goods falls,and the prices of those goods fall.
D) If the price of labor falls,the demand for goods rises,and the prices of those goods fall.
E) If the price of labor falls,the supply of goods falls,and the prices of those goods fall.

Question

Quizplus · Accepted Answer

When the price of labor falls, the cost of producing goods decreases for firms. As a result, they can produce more goods and offer them at a lower price. This increases the supply of goods in the market and puts downward pressure on their prices. Thus, if labor becomes cheaper, the prices of goods will follow suit and fall as well.

Labor Is a Resource That Is Necessary to Produce Many