Mr.X works in the warehouse of a large textile firm located in the United States.The firm outsources the production of its textiles to another nation.Which of the following is an example of the possible substitution effect of this event on Mr.X?

Question

Quizplus · Accepted Answer

The outsourcing of production would lead to a decrease in demand for warehouse workers in the United States and an increase in demand for warehouse workers in the other nation, as the production is being moved to that location. This is an example of the substitution effect, where the production is being substituted from one location to another, leading to a change in the demand for workers in each location. Option A is incorrect, as the increase in demand for textiles would lead to an increase in demand for warehouse workers in the short term, but in the long term, the outsourcing of production would lead to a decrease in demand for workers.

MrX Works in the Warehouse of a Large Textile Firm