Although the marginal productivity of hair stylists has remained roughly constant since the 1960s,the real wages (wages adjusted for inflation)of hair stylists have increased significantly.Assume that the labor market for hair stylists and the market for hair-styling services are perfectly competitive.What best explains this finding? Explain your answer.

Question

Quizplus · Accepted Answer

The increase in real wages suggests an increase in the demand for hair styling services, meaning that the market demand curve has shifted to the right. This can be caused by several factors such as an increase in population, higher disposable incomes, changes in fashion trends, etc. As a result, hair stylists are able to command higher wages even though their productivity has remained constant. Options A and B are not applicable since they suggest changes in supply-side factors, which do not directly affect wages in a perfectly competitive labor market.

Although the Marginal Productivity of Hair Stylists Has Remained Roughly