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

Question

Quizplus · Accepted Answer

If it is easier to substitute between a factor and others, the demand for that factor will be more elastic because producers can easily switch to using other factors if the price of the factor increases. This means that the factor's price elastic demand will increase, so it becomes easier for producers to reduce the quantity of the factor that they use if the price increases. Therefore, the elasticity of demand for a factor depends on the ease with which producers can substitute other factors for it.

The Demand for a Factor Will Be More Elastic If