As the result of an increase in the price of capital, the demand for labor would ________, the supply of labor would ________, and the quantity of labor hired would ________.

Question

Quizplus · Accepted Answer

An increase in the price of capital makes capital more expensive relative to labor, leading firms to substitute labor for capital, thus decreasing the demand for labor. The supply of labor is determined by workers and is not directly affected by the price of capital, so it remains the same. With decreased demand and unchanged supply, the quantity of labor hired would decrease.

As the Result of an Increase in the Price of Capital