Faustmann owns a small forestry company in New Zealand. Which of the following events will lead to an increase in Faustmann's labour demand curve for timber-workers? (i) the price of A-grade timber increases
(ii) local workers form a union to protect themselves from low wages
(iii) Faustmann installs a new drying kiln to increase the volume of timber that can be processed

Question

Quizplus · Accepted Answer

The price of A-grade timber increasing would lead to an increase in demand for timber-workers as Faustmann's profitability increases and they are able to invest in expanding their production. Additionally, the installation of a new drying kiln would also increase demand for timber-workers as more wood can be processed, requiring more labour. However, the formation of a union to protect workers from low wages does not necessarily lead to an increase in demand for labour - it may lead to wage increases for existing workers but does not affect the quantity demanded. Therefore, option (ii) is not correct.

Faustmann Owns a Small Forestry Company in New Zealand