Why does supply increase instead of demand in this example?

Question

The auto worker union settles for lower wages for all American auto workers (only). The impact on the martket for American automobiles results in an increase in supply.

Answer 1

Wages drop so at any given point along the supply curve, more can be supplied. The whole supply curve shifts.

The demand curve doesn't change, but you do move along the demand curve to a new equilibrium which would be at the larger quantity available.

Answer 2

When worker wages drop, the cost of inputs goes down, and so at any given price, the auto company will make more profit. So the supply curve shifts out. With lower costs, the profit maximizing move for the auto company is to drop prices and increase volumes.
The demand curve stays the same, since at any given price, the same amount of autos will be purchased as before.

Answer 3

The workers are working for lower wages, which means the company will be able to produce more product since they wont have to spend as much to have cars made. That will mean more cars on the market. The supply of cars increases, but the demand for cars is not effected in this scenario

Answer 4

Simply shows that wages have nothing to do with the way cars are priced by the sales department. Accounting methods allow Companies to state what they would like to make this year. If they don't reach that goal. It is considered a financial loss. So hind site is great. If they sold 300,000 of a certain model last year, they will build 400, 000 this year. If the market has slowed there are more cars than buyers.Get it?

Answer 5

lower wages = a decrease in input cost to produce a good or service, in this case cars, thus the car company can afford to make more cars now cause they cost less to make, giving you an increase in the supply of cars.

Answer 6

Supply increases because since wages decreased, then the amount of money that the car companies had to produce cars increased so they produced more.

Answer 7

Workers have less money to spend so cars go unsold. Paying lower wages doesn't mean manufacturers will necessarily produce more cars, they may just take more profit on existing supply...