Suppose That Laws Are Passed Banning Labour Unions and That

question 66

Essay

Suppose that laws are passed banning labour unions and that resulting lower labour costs are passed along to consumers in the form of lower prices.Use the aggregate demand-aggregate supply model to illustrate graphically the impact in the short run and the long run of this favourable supply shock.Be sure to label:
i.the axes
ii.the curves
iii.the initial equilibrium values
iv.the direction the curves shift
v.the short-run equilibrium values
vi.the long-run equilibrium values.State in words what happens to prices and output in the short run and the long run.

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Definitions:

Lease Financing

A method of financing where a firm obtains the use of certain assets through leasing, avoiding the need to invest capital in them.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or investment.

Foregone CCA

The term "Foregone CCA" does not exist in widely recognized financial lexicons and might be incorrectly stated or highly specific to a niche sector.

Tax Shield

The reduction in income taxes that results from taking allowable deductions from taxable income, such as interest on debt.