1) The cobweb model suggests that employment cycles are most likely to occur in those labor markets in which:
A. there are low educational requirements.
B. there is a lagged demand response.
C. None of the above is correct.
D. there are high educational requirements.
There should be high educational requirements existing in the labour market. This is because when there is an increase in the demand for a particular profession, there is not enough availability of labor associated with the profession so that there is an increase in the wage rate for that job. As the workers acquire the required skills which takes time, the supply has a lagged response, resulting in increasing the supply of workers of their profession when the demand has somehow undermined.
Select option D
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