Suppose there is a decline in the demand for the product labor is producing. Furthermore, the price of capital, which is complementary to labor, increases. Thus, 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 will decrease because a decline in the demand for the product reduces the need for labor to produce that product. Additionally, an increase in the price of capital, which is complementary to labor, makes production more expensive, further reducing the demand for labor.

Suppose There Is a Decline in the Demand for the Product