When an increase in the use of one factor of production decreases the demand for the other, the two factors are complementary factors of production.

Question

Quizplus · Accepted Answer

When an increase in the use of one factor of production decreases the demand for the other, the two factors are called substitutable factors of production, not complementary. Complementary factors of production are those that are typically used together in the production process, such as labor and capital. An increase in the use of one would typically increase the demand for the other, rather than decrease it.

When an Increase in the Use of One Factor of Production