Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, which causes domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, the demand for labor in the shoe industry ________ and the demand for labor in the computer industry ________.
A)increases; increases
B)increases; decreases
C)decreases; increases
D)decreases; decreases

Question

Quizplus · Accepted Answer

In this case, fewer workers are demanded in the declining shoe industry, while more workers are demanded in the growing computer industry.

Initially, Workers in the Shoe Industry and the Computer Industry