Other things being equal, if it becomes more difficult to substitute capital for labour in the production of cell phones, the demand curve for labour in that industry
A) will become more elastic.
B) will shift parallel to the left.
C) will become more inelastic.
D) will shift parallel to the right.
E) will remain unchanged.

Question

Quizplus · Accepted Answer

If it becomes more difficult to substitute capital for labour in the production of cell phones, it means that the production process will become more labor-intensive. This will make the demand for labor more inelastic because firms will have fewer options to substitute labor with capital. This means that even if the wage rate increases, firms will be reluctant to reduce their demand for labor as they cannot substitute it easily. Therefore, the demand curve for labor in the industry will become more inelastic.

Other Things Being Equal, If It Becomes More Difficult to Substitute