Other things being equal, a firm's demand for labor is likely to be more elastic than its demand for capital if
A)labor costs are a smaller proportion of total costs than capital costs.
B)the firm uses labor-intensive production techniques.
C)substitutions of one resource for another are difficult.
D)the demand for its final product is price elastic.

Question

Quizplus · Accepted Answer

Labor-intensive production techniques imply that labor is a significant input in the production process, making the demand for labor more responsive (elastic) to changes in wage rates compared to capital, which might not be as easily substitutable or adjustable in the short term.

Other Things Being Equal, a Firm's Demand for Labor Is