A change in a factor's price will have a greater effect on the quantity of the factor demanded the
A)smaller the change in the factor's price.
B)smaller the factor's share of total cost of production.
C)more elastic is the demand for the product the factor helps to make.
D)more inelastic is the demand for the product the factor helps to make.

Question

Quizplus · Accepted Answer

The demand for a factor of production is more elastic when the demand for the product it helps to make is more elastic. This is because if the final product's demand is sensitive to price changes, then any change in the cost of production (including changes in the price of factors of production) can significantly affect the quantity of the product demanded, thereby affecting the demand for the factors used to produce it.

A Change in a Factor's Price Will Have a Greater