Changes in Factor Demand and Supply - AP Microeconomics

1. What effect does a technological advancement have on factor demand?

   It increases the demand for that factor. Technology improves productivity, raising MRP.

2. What is the effect of an increase in factor productivity on factor demand?

   It increases factor demand. Higher productivity raises MRP and factor demand.

3. What happens to factor supply when working conditions improve?

   Factor supply increases. Better conditions attract more workers to supply.

4. What causes an increase in the demand for a factor of production?

   An increase in the demand for the product it helps produce. Factor demand is derived from product demand.

5. Identify the effect on labor supply if retirement age is postponed.

   Labor supply increases. Delayed retirement keeps workers in labor force.

6. What happens to factor demand when productivity increases?

   Factor demand increases. Higher productivity increases MRP and demand.

7. Identify a factor that can increase the supply of labor.

   Increased immigration policies. Immigration increases available labor force.

8. What is the effect of a decrease in interest rates on capital supply?

   Capital supply increases. Lower interest rates reduce capital costs.

9. How does an increase in consumer demand for a product affect factor demand?

   It increases factor demand. Higher product demand increases derived factor demand.

10. Find the impact on factor demand when the price of output increases.

    Factor demand increases. Higher output prices increase MRP and factor demand.

11. What effect does a decrease in technology costs have on factor demand?

    Factor demand increases. Cheaper technology increases its demand as factor.

12. What happens to factor demand if the price of a substitute factor falls?

    Factor demand decreases. Cheaper substitutes reduce demand for original factor.

13. What effect does an increase in factor price have on factor demand?

    It decreases factor demand. Higher prices reduce quantity demanded via law of demand.

14. What is the effect of improved training programs on factor supply?

    It increases factor supply. Training improves worker skills and availability.

15. Which factor causes an increase in factor supply?

    An increase in the number of suppliers. More suppliers increase market availability.

16. What is the effect of a decrease in taxes on factor supply?

    Factor supply increases. Lower taxes increase net returns to suppliers.

17. Identify the impact of an increase in the price of raw materials on factor demand.

    Factor demand decreases. Higher input costs reduce profitability and factor demand.

18. Identify the impact of a recession on factor demand.

    Factor demand decreases. Recessions reduce output demand and factor needs.

19. What happens to factor supply if there is a tax on production?

    Factor supply decreases. Production taxes increase costs, reducing supply.

20. What occurs when the cost of a complementary factor decreases?

    Factor demand increases. Cheaper complements increase demand for both factors.

21. What happens to factor demand when there is a decrease in the demand for the product?

    Factor demand decreases. Factor demand derives from product demand.

22. Identify the impact of an increase in the number of firms on factor demand.

    Factor demand increases. More firms create greater total factor demand.

23. What happens to factor supply if there is a reduction in regulatory barriers?

    Factor supply increases. Reduced barriers lower entry costs for suppliers.

24. What effect does a decrease in transportation costs have on factor supply?

    Factor supply increases. Lower transport costs make factors more accessible.

25. Identify the effect of unionization on factor demand.

    It can decrease factor demand. Unions may increase wages, reducing quantity demanded.

26. What effect does a government subsidy have on factor supply?

    It increases factor supply. Subsidies lower production costs, encouraging supply.

27. Find the impact on factor supply when wages increase due to a shortage.

    Factor supply increases. Higher wages attract more factor suppliers.

28. What happens to labor supply if there are more part-time job opportunities?

    Labor supply increases. Part-time options attract more workers to market.

29. Identify one factor that can cause a decrease in factor supply.

    A natural disaster affecting resource availability. Natural disasters reduce factor availability.

30. State the formula for the marginal revenue product (MRP).

    $MRP = MR \times MP$. MRP equals marginal revenue times marginal product.

31. Which factor can decrease the demand for labor?

    Automation or technology replacing labor. Technology substitutes for human workers.

32. Which factor can increase the demand for skilled labor?

    Advancements in technology requiring new skills. Technology advances create demand for new skills.

33. How does a decrease in the cost of capital affect labor demand?

    Labor demand might decrease. Cheaper capital substitutes for labor input.

34. What is the impact on factor supply if education levels increase?

    Factor supply increases. Education improves worker productivity and availability.

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