The demand for a factor will be more elastic if
A)there is little substitutability between factors.
B)it is easier to substitute between this factor and others.
C)that factor determines a small percentage of total cost.
D)the demand for the good being produced is inelastic.
E)the supply of the factor is elastic.

Question

Quizplus · Accepted Answer

When it is easier to substitute between the factor in question and other factors, the demand for that factor will be more elastic. This is because, if the price of the factor rises, producers can readily switch to alternative factors for production, reducing their demand for the original factor. This means that producers are more sensitive to changes in the price of the factor, and the elasticity of demand is higher.

The Demand for a Factor Will Be More Elastic If