📚 Learning Guide
Product and Factor Markets
hard

If a significant increase in demand for electric cars occurs, leading to higher wages for workers in the automotive industry, what is the most likely underlying cause of this wage increase?

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Choose the Best Answer

A

Increased productivity of workers due to better training

B

A shift in consumer preferences towards electric cars

C

A decrease in the supply of labor in the automotive sector

D

A rise in taxes affecting automotive companies

Understanding the Answer

Let's break down why this is correct

Answer

If there is a significant increase in demand for electric cars, it means more people want to buy them, which can lead to car companies needing to produce more vehicles. To meet this higher demand, these companies may need to hire more workers or pay current workers more to keep up with the production schedule. This increased competition for workers can drive wages higher because companies want to attract skilled labor who can help build the cars. For example, if a factory that makes electric cars expands its operation, it might offer higher wages to attract more workers, ensuring they have enough staff to produce the cars efficiently. This wage increase reflects the growing importance of the electric car market and the need for skilled workers in that industry.

Detailed Explanation

When more people want electric cars, companies need more workers to make them. Other options are incorrect because Some might think better training makes workers more productive; A decrease in workers might seem like a reason for higher wages.

Key Concepts

Product and Factor Markets
Derived Demand
Labor Market Dynamics
Topic

Product and Factor Markets

Difficulty

hard level question

Cognitive Level

understand

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