Labor Demand Is More Elastic the Greater the Elasticity of Substitution

question 7

Multiple Choice

Labor demand is more elastic the greater the elasticity of substitution between labor and capital because

• A) workers supply more labor when their wage increases.
• B) the firm's output price falls when the firm produces more output.
• C) a firm is less willing to pay higher labor costs if it is easy for the firm to substitute capital for labor.
• D) firms always have the option of substituting capital for labor.
• E) a firm's technology is slow to change.

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