Asked by
Leveta Smith
on Nov 26, 2024Verified
Suppose capital is readily substitutable for labor and that the price of capital falls. We can conclude that the
A) substitution effect will tend to reduce the demand for labor.
B) output effect will tend to reduce the demand for labor.
C) demand for labor will necessarily decline.
D) demand for labor will necessarily increase.
Substitution Effect
The economic understanding that as prices rise or income decreases, consumers will replace more expensive items with cheaper alternatives.
Price of Capital
The cost of using capital assets, which can include interest rates on loans used to purchase the assets or opportunity costs of investing capital elsewhere.
Demand for Labor
The total amount of labor that employers want to hire at varying wage rates in a given time period.
- Detail the repercussions of complementary and substitute resources on labor force and marketplaces for products.
Verified Answer
LS
Learning Objectives
- Detail the repercussions of complementary and substitute resources on labor force and marketplaces for products.