A low birthrate in Japan led to a general increase in the age of the population in the country. During the 1990s, this led to a decrease in the number of working age people in Japan. What would we expect to occur in the labor market?

• A. Labor demand increases
• B. Labor demand decreases
• C. Labor supply increases
• D. Labor supply decreases

Answer: (D)

Verified step by step guidance

1. Understand the basic concepts: The labor market consists of labor supply and labor demand. Labor supply refers to the number of people willing and able to work, while labor demand refers to the number of workers that employers are willing and able to hire.
2. Identify the key issue: The problem states that there is a decrease in the number of working-age people due to a low birthrate and an aging population. This directly affects the labor supply.
3. Analyze the impact on labor supply: With fewer working-age individuals, the pool of available workers decreases. This means that the labor supply in the market will decrease.
4. Consider the effects on labor demand: While the problem does not provide direct information about changes in labor demand, a decrease in labor supply can lead to increased competition for workers, potentially affecting wages and employment conditions.
5. Conclude the expected outcome: Given the decrease in the number of working-age people, we would expect the labor supply to decrease in the labor market, aligning with the correct answer provided.