A change in the supply of any one factor alters the earnings of all the other factors.

Question

Quizplus · Accepted Answer

When the supply of any one factor changes, it affects the production process and therefore affects the earnings of all the other factors involved in that process. For example, if the cost of raw materials increases, it may reduce profits and therefore affect the wages of workers, the return on capital investment, and the rent paid on land or buildings. Therefore, a change in supply of any one factor affects the earnings of all other factors.

A Change in the Supply of Any One Factor Alters