Suppose the productivity of labor increases and at the same time the price of capital, which is complementary to labor, increases. As a result, the demand for labor
A)will increase.
B)will decrease.
C)may either increase or decrease.
D)will not change.

Question

Quizplus · Accepted Answer

The demand for labor may either increase due to higher productivity (which makes labor more valuable) or decrease because the higher cost of complementary capital could reduce overall production or the use of labor. The net effect is uncertain without more information.

Suppose the Productivity of Labor Increases and at the Same