Question

Suppose that the labor market for life guards is initially in equilibrium. Then swimming pool owners adopt a new labor-saving technology that uses computers to monitor the locations of swimmers in the pool. What happens to the equilibrium wage and quantity of life guards?

a. Both the equilibrium wage and quantity increase.
b. Both the equilibrium wage and quantity decrease.
c. The equilibrium wage increases, and the equilibrium quantity decreases.
d. The equilibrium wage decreases, and the equilibrium quantity increases.

Answer 1

b. Both the equilibrium wage and quantity decrease.

Step-by-step explanation:

When a market is in equilibrium, quantity supplied equals quantity demanded.

When swimming pools adopt labour saving technology, the quantity of labour demanded falls. This leads to a decrease in equilibrium wage and quantity . When supply exceeds demand, wages fall and labour would leave the lifeguard industry due to decreased demand.

Check out the attached image for a graphical explanation

I hope my answer helps you.