Which of the following scenarios represents a decrease in labor demand due to a change in product demand?

• A. A rise in the price of raw materials used by the firm.
• B. A decline in consumer preference for the firm's product, leading to lower sales.
• C. An increase in the wage rate paid to workers.
• D. The introduction of new labor-saving technology in the production process.

Answer: (B)

Verified step by step guidance

1. Understand that labor demand is a derived demand, meaning it depends on the demand for the final product the labor helps produce.
2. Identify that a decrease in labor demand due to a change in product demand occurs when the demand for the firm's product falls, reducing the need for labor to produce that product.
3. Analyze each scenario: a rise in raw material prices affects production costs, not directly product demand; an increase in wage rate affects labor cost, not product demand; new labor-saving technology affects labor productivity, not product demand.
4. Recognize that a decline in consumer preference for the firm's product directly reduces product demand, which in turn lowers the demand for labor to produce that product.
5. Conclude that the scenario describing a decline in consumer preference leading to lower sales best represents a decrease in labor demand due to a change in product demand.