Other things being equal, a _____________ supply of workers tends to _________ real wages.

Question

BlackTom AI · Accepted Answer

To unpack this question, we compare how changing the labor supply affects real wages under ceteris paribus (other things being equal).
Option 1: 'smaller; not change' would imply that a decrease in the number of workers leaves real wages unchanged. In standard supply and demand for labor, reducing the supply of workers tends to raise wages, not leave them unchanged, assuming demand remains constant. Therefore this option misstates the typical relationship between labor supply and real wages.
Option 2: 'larger; increase' posits that a bigger labor supply raises real wages. In a simple competitive labor market, increasing the number of workersshifts the supply curve to the right, which generally lowers the equilibrium wage if the demand for labor is unchanged. Hence this option conflicts with the basic supply-and-demand intuition for wages.
Option 3: 'smaller; decrease' suggests that fewer workers would lead to lower real wages. With a smaller supply of labor, wages should rise (or at least not fall) if demand is constant, so this option contradicts the standard outcome of a leftward shift in labor supply.
Option 4: 'larger; decrease' states that an increased supply of workers leads to lower real wages. This aligns with the core mechanism: more workers available means downward pressure on the wage rate, all else equal, because the supply of labor is higher relative to the demand for labor. This is the typical direction of change in a competitive labor market when the labor supply expands.

Other things being equal, a _____ supply of workers tends to _ real wages.

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