Part A: A decrease in the wage rate of pizza makers will cause a movement from point B on supply curve S2 to

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Part A: A decrease in the wage rate of pizza makers will cause a movement from point B on supply curve S2 to

BlackTom AI · Accepted Answer

Question restatement: The prompt asks about what happens to the quantity supplied when there is a decrease in the wage rate of pizza makers, with reference to moving from point B on supply curve S2 to a position labeled up on S1.

Key concept: A fall in input costs (such as wages) reduces the production cost per unit for firms. When costs decrease, producers are willing to supply more at each price, which shifts the entire supply curve to the right. This is a supply-side shift, not a movement along the same curve due to a price change.

Option analysis (conceptual, since no explicit options are given):
- Why supply would increase: With lower wages, pizza makers cost less to employ, so firms can produce more pizzas for the same revenue, incentivizing higher output. This corresponds to a rightward shift of the supply curve from S2 toward a new position like S1, reflecting a higher quantity supplied at each price.
- Why this is not a movement along S2: If only the wage rate changes while all else remains constant, the cost structure changes, which alters supply, not just the observed quantity at a given price. A movement along S2 would imply pricing changes along the same curve, not a change in input costs driving the shift.
- If someone argued the effect would be a decrease in supply: that would be inconsistent with lower costs. Lower input costs should not reduce supply, because producers have an incentive to supply more, not less, when their margins improve.

Putting it together: The expected outcome is an increase in quantity supplied as supply shifts to the right due to the lower wage rate. In the graph described, that appears as moving from point B on S2 to a higher-quantity position on the new or shifted supply curve to the right (conceptually labeled as S1 or an equivalent rightward shift).

Note on wording: If the question intends a movement along a single curve rather than a shift, that would imply a change in the good’s market price rather than a change in input costs. However, since the prompt mentions a wage decrease, the standard interpretation is a shift to the right of the supply curve, not merely movement along S2.

ECON_002_001_25F Problem Set 1

Part A: A decrease in the wage rate of pizza makers will cause a movement from point B on supply curve S2 to

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