Assuming an increase in demand for export goods, explain the change in demand curve and labor...

Assuming an increase in demand for export goods, explain the change in demand curve and labor supply, if any.

Expert Solution

When there is an increase in the demand for export goods, the aggregate demand of the country increases. Aggregate demand is the sum of consumption expenditure, investment expenditure, government expenditure, and net exports. Thus when the exports increase, the aggregate demand of the economy increases.

Also, when the demand for exports increases, the demand curve of exported goods will shift to the right.

When there is an increase in the demand for exports, the production in the country of exported goods will increase. This expansion in production in a country will increase the labor demanded to carry out production process. When the demand for labor increases, it will increase the equilibrium wage rate in the economy. This will lead to increase in the labor supply (since labor supply is directly related to wages). An increase in wages will attract more labor to join the labor market and the labor supply will increase.

Rahul Sunny answered 8 months ago

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