Question
3. How would the Supply schedule be affected if the workers at a Nike factory in Indonesia went on strike and decided they wouldn't work unless they received higher pay? Increase Decrease Factor that shifts the supply line:
Answer
4.6
(224 Votes)
Keren
Master · Tutor for 5 years
Answer
Decrease
Explanation
The 'Supply Schedule' in this question refers to a table that enumerates how much a firm or an industry will produce at various price points in a given period of time provided all factors other than price remain fixed. In this case, the factor is the worker's demand for higher pay. If the workers at the Nike factory in Indonesia go on strike, the production would drop until the strike is over or the issue is resolved. Cost of production includes labor cost, so when labor cost increases due to workers demanding higher pay, this would automatically imply that the cost of production becomes expensive. Hence, firms would produce less goods at the current price. Economically, this can be explained via the 'Law of Supply', which states that other factors remaining constant, price and quantity supplied of a good are directly related i.e. as the prices of goods increase, the suppliers are willing to supply more of it and vice-versa. That's why the increase in production cost would result in a decrease in supply.