In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
In the figure,
D: Demand curve for automobiles
S 1 : Supply curve of automobiles prior to regulation
S 2 : Supply curve of automobiles after regulation
FG: Clean up cost per unit
-During the recession witnessed in early 2001, many firms laid off their employees and downsized. The reason for this decrease in the demand for employees was:
A)a reduction in the demand for final goods.
B)a reduction in the prices of final goods.
C)an increase in the demand for final goods.
D)an increase in the prices of final goods.
E)the incompetency and poor performance of the employees.

Question

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
  In the figure,
D: Demand curve for automobiles
S 1 : Supply curve of automobiles prior to regulation
S 2 : Supply curve of automobiles after regulation
FG: Clean up cost per unit
-During the recession witnessed in early 2001, many firms laid off their employees and downsized. The reason for this decrease in the demand for employees was:
A)a reduction in the demand for final goods. 
B)a reduction in the prices of final goods. 
C)an increase in the demand for final goods. 
D)an increase in the prices of final goods. 
E)the incompetency and poor performance of the employees.

Quizplus · Accepted Answer

A recession typically leads to a decrease in the demand for final goods, as consumers cut back on their spending. This reduction in demand for final goods results in lower production levels and reduced demand for employees.

In the Following Figure, the First Panel Shows a Market