If the Price of Labor Falls Relative to the Price

question 102

Multiple Choice

If the price of labor falls relative to the price of capital,and as a result the quantity of capital employed decreases,it can be concluded that:

• A) the substitution effect is greater than the output effect.
• B) the output effect is greater than the substitution effect.
• C) the income effect is greater than the output effect.
• D) labor cannot be easily substituted for capital.

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Definitions:

Correlation Coefficient

A numerical measure that quantifies the degree and direction of the relationship between two variables.

Association

A statistical relationship between two or more variables, indicating that changes in one variable are related to changes in another variable, without implying causation.

Greek Letter

Symbols from the Greek alphabet used in various scientific fields, including mathematics and statistics, to represent variables and constants.

Rho

In statistics, a measure of correlation (denoted as ρ) indicating the strength and direction of a linear relationship between two variables.