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.

---

Definitions:

Cash

A form of currency that includes physical bills and coins used in transactions.

Voting Shares

Shares that give the owner the right to vote on company matters, such as electing directors, at shareholder meetings.

Fair Value

Fair value is the estimated market price of an asset or liability, reflecting the amount at which an informed transaction could take place between willing parties.

Pushdown Accounting

An accounting method where the purchase price of an acquired entity is pushed down onto the acquired entity's financial statements.