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The market for manicures and other nail treatments is very competitive
The market for manicures and other nail treatments is very competitive. How would the following developments affect the quantity of nail treatments that a typical nail salon wants to supply in the short run? a. Heightened concern about their appearance causes people to want more manicures at a given price. b. The government requires all nail salons to pay a new yearly licensing fee to operate. e. Worse job prospects elsewhere in the economy cause more people to want to become manicurists, causing the wages of manicurists to fall.
Expert Solution
a. As demand for manicures by people increases, the price will increase in the market and this increase in prices will induce the suppliers to supply more and more of manicures at a given price. Thus, the quantity supplied of manicures will increase in this case.
b. Payment of licensing fee will increase the cost of production in the market. Increase in the cost of production will reduce profits of the firms and thus firms will supply less amount of manicures and nail treatments. Thus, quantity supplied will decrease.
c.As the cost of production in the market falls due to fall in the wage rate, the profits will increase and this will increase quantity of manicures in the short run by the firms.
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