Suppose the Substitution Elasticity Between Capital and Labor Is -2

question 8

Multiple Choice

Suppose the substitution elasticity between capital and labor is -2.6%.What does this imply about the demand for labor?

• A) The long run demand for labor is relatively inelastic.
• B) The long run demand for labor is relatively elastic.
• C) The short run demand for labor is relatively inelastic.
• D) The long run supply of labor is relatively inelastic.
• E) The long run supply of labor is relatively elastic.

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Definitions:

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