Suppose the United Auto Workers union obtains a substantial wage increase for auto workers. How will...

Suppose the United Auto Workers union obtains a substantial wage increase for auto workers. How will this affect the market for automobiles?

Draw a graph depicting the supply and demand for cars to illustrate your answer and attach with your response.

Expert Solution

Ans) With increase in wages, the input cost of the automobile firm will increase. Increase in input cost will force the firm to decrease the production. As a result, the supply of automobile in the market will decrease and the price will increase. The supply curve will shift leftwards.

Rahul Sunny answered 2 years ago

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