Fading Fashion Demand
The question
The competitive labor market for garment sewers in the city of Taverna is in equilibrium. Consumer tastes shift away from the style of clothing these firms make, and the price the firms can charge for their garments falls sharply. Assume worker productivity and the number of people willing to sew are unchanged. Show the effect on the labor market for garment sewers. Show the effect on the Labor Market graph.
Drag a curve, or use the arrow buttons. Want the free-play version with every control? Open this graph in the sandbox.
Fading Fashion Demand: the worked answer
On the Labor Market graph, Labor demand (DL) shifts left.
Why Labor demand (DL) shifts left
Firms hire labor up to the marginal revenue product of labor, which equals the marginal product of labor times the price of the output. When consumer tastes shift away from these garments the output price falls, so each sewer's MRP falls and firms are willing to hire fewer workers at every wage, shifting labor demand to the left. Workers' willingness to sew at each wage is unaffected because their productivity and outside options have not changed, so labor supply stays put.
What happens to the equilibrium
The equilibrium market wage falls and the level of employment decreases.
The mistake students make on this one
Students frequently shift labor supply left as well, treating the resulting layoffs as workers leaving the market. Sewers losing jobs is the fall in quantity of labor demanded and a movement along the supply curve to a lower wage, not a change in how many people are willing to sew at any given wage.
On exam day
Labor is a DERIVED demand: a change in consumers' taste for the product reaches the labor market only through the output price inside MRP, so it is always a labor demand event with supply held fixed.
How this is graded
The checker reads every curve's position before and after your answer. You are marked correct only when Labor demand (DL) shifts left and every other curve on the Labor Market graph stays where it started — the same standard an AP reader applies to a drawn graph: the right shift, and nothing extra. There is no AI involved; the rubric is the geometry.
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