An increase in the supply of capital, which is a substitute to labor, will lead to a decrease in the demand for labor.

Name: An increase in the supply of capital, which is a substitute to labor, will lead to a decrease in the demand for labor.
Brand: Quizplus
Rating: 4.8 (46 reviews)

Question

Quizplus · Accepted Answer

An increase in the supply of capital will lead to a substitution effect, where capital becomes relatively cheaper compared to labor. As a result, firms will substitute capital for labor, leading to a decrease in the demand for labor.

An Increase in the Supply of Capital, Which Is a Substitute