Scenario 18-8
Suppose the following events occur in the market for university economics professors.
Event 1: A recession in the U.S. economy lowers the opportunity cost of going to graduate school in economics to become a university economics professor.
Event 2: A decreasing number of students in U.S. primary and secondary schools decreases the number of students entering college, decreasing the output price of university economics professors' services.
-Refer to Scenario 18-8. As a result of these two events, holding all else constant, the equilibrium wages of university economics professors will
A)increase.
B)decrease.
C)not change.
D)It is not possible to determine what will happen to the equilibrium wage.

Question

Quizplus · Accepted Answer

Event 1 leads to an increase in the supply of potential economics professors, which puts downward pressure on wages. Event 2 decreases demand for economics professors due to the decreasing number of students entering college, which puts additional downward pressure on wages. Therefore, the equilibrium wages of university economics professors will decrease.

Scenario 18-8 Suppose the Following Events Occur in the Market for University