If the Price of Labor Falls

question 88

Multiple Choice

If the price of labor falls,

• A) we can conclude that the demand for capital will always decrease because only the factor substitution effect is relevant.
• B) we can conclude that the demand for capital will always increase because only the output effect is relevant.
• C) the change in the demand for capital cannot be predicted because the factor substitution effect and output effect work in opposite directions.
• D) the demand for capital will be unaffected, because only a change in the price of capital would change the demand for capital.

---

Definitions:

Crisis

A critical or tumultuous situation that requires immediate attention and action to manage and mitigate its effects.

Ego Defense

Psychological strategies deployed by the individual to manage stress, conflict, and inner turmoil, preserving self-esteem.

Identity States

Psychological conditions representing different understandings and degrees of personal identity development.

Moratorium

Identity status, described by Marcia, in which a person is currently considering alternatives (in crisis) and seems headed for commitment.